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Risk-shifting and investment asymmetry

  • Eisdorfer, Assaf
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    I 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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    File URL: http://www.sciencedirect.com/science/article/B7CPP-507CRV2-2/2/72ab1dc6670b9e5f7b6f7813b726d236
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    Article provided by Elsevier in its journal Finance Research Letters.

    Volume (Year): 7 (2010)
    Issue (Month): 4 (December)
    Pages: 232-237

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    Handle: RePEc:eee:finlet:v:7:y:2010:i:4:p:232-237
    Contact details of provider: Web page: http://www.elsevier.com/locate/frl

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