Subsidiary debt,capital structure and internal capital markets |
| |
Authors: | Adam C. Kolasinski |
| |
Affiliation: | University of Washington, Michel G Foster School of Business, Seattle, WA 98195, USA |
| |
Abstract: | I study external debt issued by operating subsidiaries of diversified firms. Consistent with Kahn and Winton's [2004. Moral hazard and optimal subsidiary structure for financial institutions. Journal of Finance 59, 2537–2575] model, where subsidiary debt mitigates asset substitution, I find firms are more likely to use subsidiary debt when their divisions vary more in risk. Consistent with subsidiary debt mitigating the free cash flow problem, I find that subsidiaries are more likely to have their own external debt when they have fewer growth options and higher cash flow than the rest of the firm. Finally, I find that subsidiary debt mitigates the “corporate socialism” and “poaching” problems modeled in theories of internal capital markets. |
| |
Keywords: | G31 G32 L22 L25 |
本文献已被 ScienceDirect 等数据库收录! |
|