Specific Human Capital, Credible Commitment and Optimal Capital Structure
AbstractIn this paper, we show that although ex ante equityholders would like to adopt an optimal displacement and operating policy, they may not have incentives to implement such a policy ex post when the manager acquires firmspecific human capital and becomes indispensable to the firm¡¯s continued operation. An optimal mix of debt and equity can serve as a commitment device in disciplining the manager.
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Bibliographic InfoArticle provided by Society for AEF in its journal Annals of Economics and Finance.
Volume (Year): 5 (2004)
Issue (Month): 1 (May)
Capital structure; Bankruptcy; Specific human capital; Credible commitment; Managerial incentive;
Find related papers by JEL classification:
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
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