Ambiguity and the Tradeoff Theory of Capital Structure /
We examine the impact of ambiguity, or Knightian uncertainty, on the capital structure decision, using a static tradeoff theory model in which agents are both ambiguity and risk averse. The model confirms the well-known result that greater risk--the uncertainty over outcomes--leads firms to decrease...
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- Elektronisch E-Book
- Sprache:
- Englisch
- Veröffentlicht:
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Cambridge, Mass.
National Bureau of Economic Research
2016.
- Zusammenfassung:
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We examine the impact of ambiguity, or Knightian uncertainty, on the capital structure decision, using a static tradeoff theory model in which agents are both ambiguity and risk averse. The model confirms the well-known result that greater risk--the uncertainty over outcomes--leads firms to decrease leverage. Conversely, the model indicates that greater ambiguity--the uncertainty over the probabilities associated with the outcomes--leads firms to increase leverage. Using a theoretically based measure of ambiguity, our empirical analysis presents evidence consistent with these notions, showing that ambiguity has an important and distinct impact on capital structure.
- Umfang:
- 1 online resource: illustrations (black and white);
- Anmerkungen:
- November 2016.
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