THE PRICING OF DEBT AND PARETO-OPTIMAL FINANCING UNDER ENDOGENOUS BANKRUPTCY

M. Shahid Ebrahim () and Ike Mathur
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M. Shahid Ebrahim: Department of Real Estate, National University of Singapore, Singapore 117566, Singapore
Ike Mathur: Department of Finance, Southern Illinois University, Carboudale, IL 6290-4626, USA

International Journal of Theoretical and Applied Finance (IJTAF), 2001, vol. 04, issue 03, 491-509

Abstract: Using an agency theoretical framework, this paper extends the optimal capital structure literature by modeling the rivalry between equity and debt to arrive at some very fundamental results involving endogeneity of bankruptcy, equilibrium interest rates, pricing of risk-free/risky debt and pareto-optimal financing techniques.

Keywords: Agency costs; bankruptcy costs; pareto-optimal contracts (search for similar items in EconPapers)
Date: 2001
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Persistent link: https://EconPapers.repec.org/RePEc:wsi:ijtafx:v:04:y:2001:i:03:n:s0219024901001085

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DOI: 10.1142/S0219024901001085

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