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Debt-Equity Conflict and the Incidence of Secured Credit
The Journal of Law and Economics ( IF 1.840 ) Pub Date : 2019-08-01 , DOI: 10.1086/705901
Barry E. Adler , Vedran Capkun

Classic finance theory observes that while debt can mitigate the conflict between equity and management, its issuance creates a conflict between debt and equity. We search for evidence of this conflict in the incidence of secured debt, which can be used by financially distressed firms to finance unduly risky projects for the benefit of equity at the expense of unsecured creditors. Skeptics of the debt-equity conflict’s practical importance believe that distressed-firm management avoids secured credit, which may compel equity to relinquish control of a firm. Consistent with the classic account, our controlled study shows a significant run-up of secured credit, as a proportion of assets and of liabilities, prior to bankruptcy filings of publicly traded firms. Together with recent evidence of inefficiency as firms approach bankruptcy, our results support proposals for the subordination of secured debt to nonconsensual claims and for enhanced enforcement of covenants against the issuance of secured credit.

中文翻译:

债务-股本冲突和担保信贷的发生

经典金融理论观察到,尽管债务可以缓解股权与管理层之间的冲突,但债务的发行却造成了债务与股权之间的冲突。我们在有担保债务发生中寻找这种冲突的证据,有财务问题的公司可以使用这些证据来为权益不高的债权人牺牲权益的风险较高的项目提供资金,从而为权益筹集资金。对债务-股权冲突的实际重要性持怀疑态度的人认为,不良企业管理会避免有担保的信贷,这可能迫使股权放弃对公司的控制。与经典帐户一致,我们的对照研究显示,在公开交易的公司申请破产之前,有担保信贷占资产和负债的比例显着增加。加上最近有证据表明,随着公司破产,效率低下,
更新日期:2019-08-01
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