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http://dspace.mediu.edu.my:8181/xmlui/handle/1721.1/4046Full metadata record
| DC Field | Value | Language |
|---|---|---|
| dc.creator | Lewellen, Katharina | - |
| dc.date | 2004-02-06T19:44:06Z | - |
| dc.date | 2004-02-06T19:44:06Z | - |
| dc.date | 2004-02-06T19:44:06Z | - |
| dc.date.accessioned | 2013-10-09T02:33:59Z | - |
| dc.date.available | 2013-10-09T02:33:59Z | - |
| dc.date.issued | 2013-10-09 | - |
| dc.identifier | http://hdl.handle.net/1721.1/4046 | - |
| dc.identifier.uri | http://koha.mediu.edu.my:8181/xmlui/handle/1721 | - |
| dc.description | This paper studies the impact of financing decisions on risk-averse managers. Leverage raises stock volatility, driving a wedge between the cost of debt to shareholders and the cost to undiversified, risk-averse managers. I quantify these "volatility costs" of debt and examine their impact on financing decisions. The paper finds: (1) the volatility costs of debt can be large, particularly if the CEO owns in-the-money options; (2) higher option ownership tends to increase, not decrease, the volatility costs of debt; (3) a stock price increase typically reduces managerial preference for leverage, consistent with prior evidence on security issues. Empirically, I estimate the volatility costs of debt for a large sample of U.S. firms and test whether these costs affect financing decisions. I find evidence that volatility costs affect both the level of and short-term changes in debt. Further, a probit model of security issues suggests that managerial preferences help explain a firm's choice between debt and equity | - |
| dc.format | 428671 bytes | - |
| dc.format | application/pdf | - |
| dc.language | en_US | - |
| dc.relation | MIT Sloan School of Management Working Paper;4438-03 | - |
| dc.subject | Executive Compensation | - |
| dc.subject | Stock Options | - |
| dc.subject | Risk Incentives | - |
| dc.subject | Leverage | - |
| dc.title | Financing Decisions When Managers Are Risk Averse | - |
| dc.type | Working Paper | - |
| Appears in Collections: | MIT Items | |
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