The Impact of Corporate Governance Structures on the Agency Cost of Debt [electronic resource] / Jorge A Chan-Lau.
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TextSeries: IMF Working Papers; Working Paper ; No. 01/204Publication details: Washington, D.C. : International Monetary Fund, 2001Description: 1 online resource (12 p.)ISBN: 1451874502 :ISSN: 1018-5941Subject(s): Agency Cost of Debt | Corporate Finance and Governance | Corporate Governance Structures | Equation | Exit Decision | Shareholder | Japan | Korea, Republic ofAdditional physical formats: Print Version:: The Impact of Corporate Governance Structures on the Agency Cost of DebtOnline resources: IMF e-Library | IMF Book Store Abstract: This paper uses a stochastic continuous time model of the firm to study how different corporate governance structures affect the agency cost of debt. In the absence of asymmetric information, it shows that control of the firm by debtholders with a minority stake delays the exit decision and reduces the underinvestment problem. Such a governance structure may play an important role in diminishing conflicts between shareholders and debtholders.
This paper uses a stochastic continuous time model of the firm to study how different corporate governance structures affect the agency cost of debt. In the absence of asymmetric information, it shows that control of the firm by debtholders with a minority stake delays the exit decision and reduces the underinvestment problem. Such a governance structure may play an important role in diminishing conflicts between shareholders and debtholders.
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