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Debt, lock‐in assets and corporate restructuring
Author(s) -
Ang James S.
Publication year - 1991
Publication title -
managerial and decision economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.288
H-Index - 51
eISSN - 1099-1468
pISSN - 0143-6570
DOI - 10.1002/mde.4090120608
Subject(s) - restructuring , debt restructuring , debt , business , agency (philosophy) , monetary economics , financial system , finance , debt overhang , economics , internal debt , sovereign debt , philosophy , epistemology , sovereignty , politics , political science , law
Why do some firms refuse to sell assets that are worth more to another firm? This paper shows that the presence of debt could cause an ex post overinvestment agency problem. In contrast to Myers' underinvestment problem, which is concerned with debt and growth assets, the model in this paper analyzes the role of debt and alternate users of assets in place. This type of agency problem is of interest because it is inherently related to the important recent corporate finance phenomenon of restructuring.