Informational role of investment and liquidation values

Autor:	Hyun Soo Doh, Yiyao Wang
Jazyk:	angličtina
Rok vydání:	2024
Předmět:	Debt overhang Investment Information asymmetry Liquidation values Finance HG1-9999 Risk in industry. Risk management HD61
Zdroj:	Seonmul yeongu, Vol 32, Iss 3, Pp 238-263 (2024)
Druh dokumentu:	article
ISSN:	2024-0007 2713-6647 1229-988X
DOI:	10.1108/JDQS-02-2024-0007/full/pdf
Popis:	We develop a credit-risk model to study the informational role of investment in an economy susceptible to large liquidity shocks. Firms' investment decisions carry information about their asset quality, thereby mitigating informational frictions when firms enter bankruptcy. An increase in aggregate investment can reduce the informational value of investment, depressing firms' recovery values. Therefore, policies boosting investment can decrease debt and firm values by reducing the informational value of investment. The presence of debt overhang may enhance firm value by making firms' investment decisions more informative. We present suggestive empirical evidence consistent with model predictions on the relation between firms' investments and recovery rates.
Databáze:	Directory of Open Access Journals
Externí odkaz:	https://doaj.org/article/e3aabe3914c242158f4f22316279c4da Zobrazit plný text záznamu View record in DOAJ