Measuring Agency Costs over the Business Cycle

Published Online:https://doi.org/10.1287/mnsc.2017.2813

References

  • Acharya V, Bharath ST, Srinivasan A (2007) Does industry-wide distress affect defaulted firms? Evidence from creditor recoveries. J. Financial Econom. 85(3):787–821.CrossrefGoogle Scholar
  • Agrawal A, Mandelker GN (1987) Managerial incentives and corporate investment and financing decisions. J. Finance 42(4):823–837.CrossrefGoogle Scholar
  • Albuquerque R, Wang N (2008) Agency conflicts, investments, and asset pricing. J. Finance 63(1):1–40.CrossrefGoogle Scholar
  • Amihud Y, Lev B, Travlos NG (1990) Corporate control and the choice of investment financing: The case of corporate acquisitions. J. Finance 45(2):603–616.CrossrefGoogle Scholar
  • Ang A, Bekaert G (2004) How regimes affect asset allocation. Financial Analysts J. 60(2):86–99.CrossrefGoogle Scholar
  • Arnold M, Wagner AF, Westermann R (2013) Growth options, macroeconomic conditions, and the cross-section of credit risk. J. Financial Econom. 107(2):350–385.CrossrefGoogle Scholar
  • Baker M, Wurgler J (2002) Market timing and capital structure. J. Finance 57(1):1–32.CrossrefGoogle Scholar
  • Barclay MJ, Holderness CG (1989) Private benefits from control of public corporations. J. Financial Econom. 25(2):371–395.CrossrefGoogle Scholar
  • Barclay MJ, Marx LM, Smith CW Jr (2003) The joint determination of leverage and maturity. J. Corporate Finance 9(2):149–167.CrossrefGoogle Scholar
  • Barclay MJ, Smith CW Jr, Morellec E (2006) On the debt capacity of growth options. J. Bus. 79(1):37–59.CrossrefGoogle Scholar
  • Barro R (1990) The stock market and investment. Rev. Financial Stud. 3(1):115–131.CrossrefGoogle Scholar
  • Berger PG, Ofek E, Yermack DL (1997) Managerial entrenchment and capital structure decisions. J. Finance 52(4):1411–1438.CrossrefGoogle Scholar
  • Bernanke B, Gertler M (1989) Agency costs, net worth, and business fluctuations. Amer. Econom. Rev. 79(1):14–31.Google Scholar
  • Bhamra HS, Kuehn L-A, Strebulaev IA (2010a) The aggregate dynamics of capital structure and macroeconomic risk. Rev. Financial Stud. 23(12):4187–4241.CrossrefGoogle Scholar
  • Bhamra HS, Kuehn L-A, Strebulaev IA (2010b) The levered equity risk premium and credit spreads: A unified framework. Rev. Financial Stud. 23(2):645–703.CrossrefGoogle Scholar
  • Billett MT, King T-HD, Mauer DC (2007) Growth opportunities and the choice of leverage, debt maturity, and covenants. J. Finance 62(2):697–730.CrossrefGoogle Scholar
  • Cantor R, Emery K, Matos A, Ou S, Tennant J (2009) Default and recovery rates, 1920–2008. Moody’s Investors Service, Global Credit Res.Google Scholar
  • Carlstrom CT, Fuerst TS (1998) Agency costs and business cycles. Econom. Theory 12(3):583–597.CrossrefGoogle Scholar
  • Chang C (1993) Payout policy, capital structure, and compensation contracts when managers value control. Rev. Financial Stud. 6(4):911–933.CrossrefGoogle Scholar
  • Chen H (2010) Macroeconomic conditions and the puzzles of credit spreads and capital structure. J. Finance 65(6):2171–2212.CrossrefGoogle Scholar
  • Chen H, Manso G (2017) Macroeconomic risk and debt overhang. Rev. Corporate Finance Stud. 6(1):1–38.CrossrefGoogle Scholar
  • Childs PD, Mauer DC, Ott SH (2005) Interactions of corporate financing and investment decisions: The effects of agency conflicts. J. Financial Econom. 76(3):667–690.CrossrefGoogle Scholar
  • Chiu D, Metz A, Ou S (2011) Default and recovery rates, 1920–2010. Moody’s Investors Service, Global Credit Res.Google Scholar
  • Coles JL, Daniel ND, Naveen L (2006) Managerial incentives and risk-taking. J. Financial Econom. 79(2):431–468.CrossrefGoogle Scholar
  • Coles JL, Daniel ND, Naveen L (2013) Calculation of compensation incentives and firm-related wealth using Execucomp: Data, program, and explanation. Working paper, Arizona State University, Tempe.Google Scholar
  • Cooper R, Haltiwanger J, Power L (1999) Machine replacement and the business cycle: Lumps and bumps. Amer. Econom. Rev. 89(4):921–946.CrossrefGoogle Scholar
  • Core J, Guay W (2002) Estimating the value of employee stock option portfolios and their sensitivities to price and volatility. J. Accounting Res. 40(3):613–630.CrossrefGoogle Scholar
  • Davydenko SA, Strebulaev IA (2007) Strategic actions and credit spreads: An empirical investigation. J. Finance 62(6):2633–2671.CrossrefGoogle Scholar
  • Dudley E (2012) Capital structure and large investment projects. J. Corporate Finance 18(5):1168–1192.CrossrefGoogle Scholar
  • Duffee GR (1998) The relation between treasury yields and corporate bond yield spreads. J. Finance 53(6):2225–2241.CrossrefGoogle Scholar
  • Duffie D, Epstein LG (1992a) Asset pricing with stochastic differential utility. Rev. Financial Stud. 5(3):411–436.CrossrefGoogle Scholar
  • Duffie D, Epstein LG (1992b) Stochastic differential utility. Econometrica 60(2):353–394.CrossrefGoogle Scholar
  • Eisfeldt AL, Rampini AA (2008) Managerial incentives, capital reallocation, and the business cycle. J. Financial Econom. 87(1):177–199.CrossrefGoogle Scholar
  • Elsas R, Flannery M, Garfinkel J (2014) Financing major investments: Information about capital structure decisions. Rev. Finance 18(4):1341–1386.CrossrefGoogle Scholar
  • Epstein LG, Zin SE (1989) Substitution, risk aversion, and the temporal behavior of consumption and asset returns: A theoretical framework. Econometrica 57(4):937–69.CrossrefGoogle Scholar
  • Fama EF, French KR (1989) Business conditions and expected returns on stocks and bonds. J. Financial Econom. 25(1):23–49.CrossrefGoogle Scholar
  • Fama EF, French KR (2002) Testing trade-off and pecking order predictions about dividends and debt. Rev. Financial Stud. 15(1):1–33.CrossrefGoogle Scholar
  • Fischer EO, Heinkel R, Zechner J (1989) Dynamic capital structure choice: Theory and tests. J. Finance 44(1):19–40.CrossrefGoogle Scholar
  • Glover B, Levine O (2015) Uncertainty, investment, and managerial incentives. J. Monetary Econom. 69(C):121–137.CrossrefGoogle Scholar
  • Goldstein R, Ju N, Leland H (2001) An EBIT-based model of dynamic capital structure. J. Bus. 74(4):483–512.CrossrefGoogle Scholar
  • Graham JR (2000) How big are the tax benefits of debt? J. Finance 55(5):1901–1941.CrossrefGoogle Scholar
  • Graham JR, Harvey CR (2001) The theory and practice of corporate finance: Evidence from the field. J. Financial Econom. 60(2–3):187–243.CrossrefGoogle Scholar
  • Guo X (2001) An explicit solution to an optimal stopping problem with regime switching. J. Appl. Probab. 38(2):464–481.CrossrefGoogle Scholar
  • Habib MA, Ljungqvist A (2005) Firm value and managerial incentives: A stochastic frontier approach. J. Bus. 78(6):2053–2094.CrossrefGoogle Scholar
  • Hackbarth D (2008) Managerial traits and capital structure decisions. J. Financial Quant. Anal. 43(4):843–882.CrossrefGoogle Scholar
  • Hackbarth D, Mauer DC (2012) Optimal priority structure, capital structure, and investment. Rev. Financial Stud. 25(3):747–796.CrossrefGoogle Scholar
  • Hackbarth D, Miao J, Morellec E (2006) Capital structure, credit risk, and macroeconomic conditions. J. Financial Econom. 82(3):519–550.CrossrefGoogle Scholar
  • Halling M, Yu J, Zechner J (2016) Leverage dynamics over the business cycle. J. Financial Econom. 122(1):21–41.CrossrefGoogle Scholar
  • Harris M, Raviv A (1990) Capital structure and the informational role of debt. J. Finance 45(2):321–349.CrossrefGoogle Scholar
  • Harris M, Raviv A (1991) The theory of capital structure. J. Finance 46(1):297–355.CrossrefGoogle Scholar
  • Hart O, Moore J (1995) Debt and seniority: An analysis of the role of hard claims in constraining management. Amer. Econom. Rev. 85(3):567–585.Google Scholar
  • Hennessy CA, Whited TM (2007) How costly is external financing? Evidence from a structural estimation. J. Finance 62(4):1705–1745.CrossrefGoogle Scholar
  • Jensen MC (1986) Agency costs of free cash flow, corporate finance, and takeovers. Amer. Econom. Rev. 76(2):323–329.Google Scholar
  • Jensen MC, Meckling WH (1976) Theory of the firm: Managerial behavior, agency costs and ownership structure. J. Financial Econom. 3(4):305–360.CrossrefGoogle Scholar
  • John TA, John K (1993) Top-management compensation and capital structure. J. Finance 48(3):949–974.CrossrefGoogle Scholar
  • Johnson SA (2003) Debt maturity and the effects of growth opportunities and liquidity risk on leverage. Rev. Financial Stud. 16(1):209–236.CrossrefGoogle Scholar
  • Johnson S, La Porta R, Lopez-de-Silanes F, Shleifer A (2000) Tunneling. Amer. Econom. Rev. 90(2):22–27.CrossrefGoogle Scholar
  • Jung K, Kim Y-C, Stulz RM (1996) Timing, investment opportunities, managerial discretion, and the security issue decision. J. Financial Econom. 42(2):159–185.CrossrefGoogle Scholar
  • Korajczyk RA, Levy A (2003) Capital structure choice: Macroeconomic conditions and financial constraints. J. Financial Econom. 68(1):75–109.CrossrefGoogle Scholar
  • Korteweg A (2010) The net benefits to leverage. J. Finance 65(6):2137–2170.CrossrefGoogle Scholar
  • Kuehn L-A, Schmid L (2014) Investment-based corporate bond pricing. J. Finance 69(6):2741–2776.CrossrefGoogle Scholar
  • La Porta R, Lopez-de-Silanes F, Shleifer A, Vishny R (2000) Investor protection and corporate governance. J. Financial Econom. 58(1–2):3–27.CrossrefGoogle Scholar
  • La Porta R, Lopez-de-Silanes F, Shleifer A, Vishny R (2002) Investor protection and corporate valuation. J. Finance 57(3):1147–1170.CrossrefGoogle Scholar
  • Lambrecht BM, Myers SC (2008) Debt and managerial rents in a real-options model of the firm. J. Financial Econom. 89(2):209–231.CrossrefGoogle Scholar
  • Lambrecht BM, Myers SC (2012) A Lintner model of payout and managerial rents. J. Finance 67(5):1761–1810.CrossrefGoogle Scholar
  • Leland HE (1994) Corporate debt value, bond covenants, and optimal capital structure. J. Finance 49(4):1213–1252.CrossrefGoogle Scholar
  • Levy A, Hennessy C (2007) Why does capital structure choice vary with macroeconomic conditions? J. Monetary Econom. 54(6):1545–1564.CrossrefGoogle Scholar
  • Longstaff FA, Mithal S, Neis E (2005) Corporate yield spreads: Default risk or liquidity? New evidence from the credit default swap market. J. Finance 60(5):2213–2253.CrossrefGoogle Scholar
  • Malmendier U, Tate G (2005) CEO overconfidence and corporate investment. J. Finance 60(6):2661–2700.CrossrefGoogle Scholar
  • Mauer DC, Ott S (2000) Agency costs, underinvestment, and optimal capital structure: The effect of growth options to expand. Brennan MJ, Trigeorgis L, eds. Project Flexibility, Agency, and Competition (Oxford University Press, New York), 151–180.Google Scholar
  • Mello A, Parsons J (1992) Measuring the agency cost of debt. J. Finance 47(5):1887–1904.CrossrefGoogle Scholar
  • Morellec E (2004) Can managerial discretion explain observed leverage ratios? Rev. Financial Stud. 17(1):257–294.CrossrefGoogle Scholar
  • Morellec E, Nikolov B, Schürhoff N (2012) Corporate governance and capital structure dynamics. J. Finance 67(3):803–848.CrossrefGoogle Scholar
  • Morellec E, Valta P, Zhdanov A (2015) Financing investment: The choice between public and private debt. Management Sci. 61(11):2580–2602.LinkGoogle Scholar
  • Morellec E, Wang N (2004) Capital structure, investment, and private benefits of control. Working paper, École polytechnique fédérale de Lausanne, Lausanne, Switzerland.CrossrefGoogle Scholar
  • Myers SC (1977) Determinants of corporate borrowing. J. Financial Econom. 5(2):147–175.CrossrefGoogle Scholar
  • Nikolov B, Whited TM (2014) Agency conflicts and cash: Estimates from a dynamic model. J. Finance 69(5):1883–1921.CrossrefGoogle Scholar
  • Parrino R, Poteshman AM, Weisbach MS (2005) Measuring investment distortions when risk-averse managers decide whether to undertake risky projects. Financial Management 34(1):21–60.CrossrefGoogle Scholar
  • Rajan RG, Zingales L (1995) What do we know about capital structure? Some evidence from international data. J. Finance 50(5):1421–1460.CrossrefGoogle Scholar
  • Rampini AA (2004) Entrepreneurial activity, risk, and the business cycle. J. Monetary Econom. 51(3):555–573.CrossrefGoogle Scholar
  • Smith CW Jr, Watts RL (1992) The investment opportunity set and corporate financing, dividend, and compensation policies. J. Financial Econom. 32(3):263–292.CrossrefGoogle Scholar
  • Strebulaev IA (2007) Do tests of capital structure theory mean what they say? J. Finance 62(4):1747–1787.CrossrefGoogle Scholar
  • Stulz RM (1990) Managerial discretion and optimal financing policies. J. Financial Econom. 26(1):3–27.CrossrefGoogle Scholar
  • van Binsbergen JH, Graham JR, Yang J (2010) The cost of debt. J. Finance 65(6):2089–2136.CrossrefGoogle Scholar
  • Weil P (1990) Nonexpected utility in macroeconomics. Quart. J. Econom. 105(1):29–42.CrossrefGoogle Scholar
  • Zwiebel J (1996) Dynamic capital structure under managerial entrenchment. Amer. Econom. Rev. 86(5):1197–1215.Google Scholar
INFORMS site uses cookies to store information on your computer. Some are essential to make our site work; Others help us improve the user experience. By using this site, you consent to the placement of these cookies. Please read our Privacy Statement to learn more.