Risk-shifting and investment asymmetry
AbstractI show that when shareholders can change not only the variance of the future firm value, but also its asymmetry, they can shift costly risk to bondholders while lowering the firm risk, and more importantly, the equity risk and the probability of bankruptcy. The implication of this result is that risk-shifting behavior can be more beneficial to shareholders than currently perceived in the literature.
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Bibliographic InfoArticle provided by Elsevier in its journal Finance Research Letters.
Volume (Year): 7 (2010)
Issue (Month): 4 (December)
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Web page: http://www.elsevier.com/locate/frl
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