Journal of Finance Vol. 45 No. 3 1990
Debt and Input Misallocation.
Abstract
The authors investigate a class of agency costs of debt that arise because debt financing affects the firm's incentives to use inputs efficiently. A methodology for estimating this class of costs is presented and applied to a major industry–air transport. The authors' results are consistent with agency models that predict a decrease in efficiency as the debt increases. A part of the loss of efficiency that they identify is attributable to the greater use by levered firms of inputs that can be monitored and are collateralizable.
- Volume
- 45
- Issue
- 3
- Pages
- 795-816
- Sources
- bibtex:phds-export.bib