Risk-shifting and investment asymmetry

Assaf Eisdorfer

Finance Research Letters, 2010, vol. 7, issue 4, 232-237

Abstract: I show that when shareholders can change not only the variance of the future firm value, but also its asymmetry, they can shift costly risk to bondholders while lowering the firm risk, and more importantly, the equity risk and the probability of bankruptcy. The implication of this result is that risk-shifting behavior can be more beneficial to shareholders than currently perceived in the literature.

Keywords: Risk-shifting; Investment (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (3)

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