This study investigates the impacts of contraction flexibility and operating leverage onfinancial leverage from the perspective of the agency conflict between shareholders and debtholders.In a continuous-time real opt...This study investigates the impacts of contraction flexibility and operating leverage onfinancial leverage from the perspective of the agency conflict between shareholders and debtholders.In a continuous-time real option framework,we demonstrate that share-holders'contraction flexibility may have an adverse effect on financial leverage,and that the substitution relation between operating leverage andfinancial leverage is persistent or pronounced in the presence of contraction flexibility.The evidence from Chinese listedfirms not only supports our theoretical predictions well,but also offers a method to examine the agency conflict hypothesis.We suggest that the high proportion of bank loans or long-term debt in total liabilities can help levered firms alleviate the agency problem arising from contraction decisions.展开更多
基金Financial supports from National Natural Science Foundation of China(Grant No.of 71472025 and 71972027)the Fund for Cultural Celebrity and Talents(Grant No.of[2015]49)are gratefully acknowledged.
文摘This study investigates the impacts of contraction flexibility and operating leverage onfinancial leverage from the perspective of the agency conflict between shareholders and debtholders.In a continuous-time real option framework,we demonstrate that share-holders'contraction flexibility may have an adverse effect on financial leverage,and that the substitution relation between operating leverage andfinancial leverage is persistent or pronounced in the presence of contraction flexibility.The evidence from Chinese listedfirms not only supports our theoretical predictions well,but also offers a method to examine the agency conflict hypothesis.We suggest that the high proportion of bank loans or long-term debt in total liabilities can help levered firms alleviate the agency problem arising from contraction decisions.
