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Liquidation Values, Risk and Capital Structure

M.A. Rosellon Cifuentes
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M.A. Rosellon Cifuentes: Tilburg University, Center for Economic Research

No 1999-32, Discussion Paper from Tilburg University, Center for Economic Research

Abstract: This paper investigate the interaction between financial structure, liquidation values and product market equilibrium. Liquidation values depend on how many firms are liquidated, and therefore on the industry equilibrium of capital structures and of technology choices. We show that firms using a technology with high liquidation value issue less debt than those with low liquidation bvalue even if these ones may be inefficiently liquidated. With respect to the equilibrium in the industry we obrtain that even if in equilibrium all firms use the same technology, firms will use widely different capital structures.

Keywords: capital; structure; technology choice; industry equilibrium; financial contracts (search for similar items in EconPapers)
JEL-codes: G32 G33 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cfn and nep-fin
Date: 1999
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