The debt hangover: Renegotiation with noncontractible investment |
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| Authors: | Sudipto Bhattacharya Antoine Faure-Grimaud |
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| Abstract: | This paper analyses the incentives of the equityholders of a levered company to undertake noncontractible investments. This noncontrability is shown to seriously impede the efficiency of any renegotiation process in the debt overhang problems. Conditions for obtaining a fully efficient level of investment choice are derived. |
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| Keywords: | Debt overhang Nonverifiable investments |
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