Debt and Input Misallocation

  • Author(s): MOSHE KIM, VOJISLAV MAKSIMOVIC
  • Published: Apr 30, 2012
  • Pages: 795-816
  • DOI: 10.1111/j.1540-6261.1990.tb05106.x

ABSTRACT

We investigate a class of agency costs of debt that arise because debt financing affects the firm's incentives to use inputs efficiently. A methodology for estimating this class of costs is presented and applied to a major industry, air transport. Our results are consistent with agency models that predict a decrease in efficiency as the debt increases. A part of the loss of efficiency that we identify is attributable to the greater use by levered firms of inputs that can be monitored and are collateralizable.

Jump to menu

Main Navigation

Search the Site / Journal

Search Keywords

Search Tips

Members' Login

Credentials

Members' Options

Site Footer

View Mobile Version