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Agency Costs, Risk Management, and Capital Structure (1998)
by
Hayne E. Leland
| Venue: | JOURNAL OF FINANCE |
| Citations: | 321 - 3 self |
BibTeX
@ARTICLE{Leland98agencycosts,,
author = {Hayne E. Leland},
title = {Agency Costs, Risk Management, and Capital Structure},
journal = {JOURNAL OF FINANCE},
year = {1998},
volume = {53},
pages = {1213--1243}
}
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Abstract
The joint determination of capital structure and investment risk is examined. Optimal capital structure reflects both the tax advantages of debt less default costs (Modigliani-Miller), and the agency costs resulting from asset substitution (Jensen-Meckling). Agency costs restrict leverage and debt maturity and increase yield spreads, but their importance is relatively small for the range of environments considered. Risk management
