Madhav S. Aney
Firm boundaries and financing with opportunistic stakeholder behaviour
Aney, Madhav S.; Appelbaum, Elie; Banerji, Sanjay
Abstract
We explore the impact of strategic behaviour of equity holders, debt holders and an opportunistic supplier of a critical input on the firm's capital structure, organisational design, and its outsourcing decision. We show that the supplier can trigger strategic bankruptcy even when the firm is solvent. Equity holders respond to this either by eliminating the supplier and producing the input in-house or by reducing their exposure to debt by using equity-financing. Both responses introduce inefficiency since input costs are higher with in-house production, and debt is cheaper than equity. We show that the equilibrium debt-equity ratio varies positively with cash-flow profitability and the marginal cost of the supplier's input, but negatively with the riskiness of the cash flow and the equity holders' in-house input production costs.
Citation
Aney, M. S., Appelbaum, E., & Banerji, S. (2019). Firm boundaries and financing with opportunistic stakeholder behaviour. Journal of Corporate Finance, 56, 437-457. https://doi.org/10.1016/j.jcorpfin.2018.12.003
Journal Article Type | Article |
---|---|
Acceptance Date | Dec 19, 2018 |
Online Publication Date | Jan 3, 2019 |
Publication Date | 2019-06 |
Deposit Date | Jan 14, 2019 |
Publicly Available Date | Jul 4, 2020 |
Journal | Journal of Corporate Finance |
Print ISSN | 0929-1199 |
Electronic ISSN | 0929-1199 |
Publisher | Elsevier |
Peer Reviewed | Peer Reviewed |
Volume | 56 |
Pages | 437-457 |
DOI | https://doi.org/10.1016/j.jcorpfin.2018.12.003 |
Keywords | incomplete contracts; opportunistic behaviour; bankruptcy; capital structure |
Public URL | https://nottingham-repository.worktribe.com/output/1467794 |
Publisher URL | https://www.sciencedirect.com/science/article/pii/S0929119917307290 |
Contract Date | Jan 14, 2019 |
Files
Firm Boundaries And Financing With Opportunistic Stakeholder Behaviour
(394 Kb)
PDF
You might also like
Political connections, bailout in financial markets and firm value
(2016)
Journal Article
Universal banking, asymmetric information and the stock market
(2016)
Journal Article
Institutions, governance and finance in a globally connected environment
(2018)
Journal Article
Monitoring costs, credit constraints and entrepreneurship
(2015)
Journal Article
Downloadable Citations
About Repository@Nottingham
Administrator e-mail: discovery-access-systems@nottingham.ac.uk
This application uses the following open-source libraries:
SheetJS Community Edition
Apache License Version 2.0 (http://www.apache.org/licenses/)
PDF.js
Apache License Version 2.0 (http://www.apache.org/licenses/)
Font Awesome
SIL OFL 1.1 (http://scripts.sil.org/OFL)
MIT License (http://opensource.org/licenses/mit-license.html)
CC BY 3.0 ( http://creativecommons.org/licenses/by/3.0/)
Powered by Worktribe © 2024
Advanced Search