活动内容
Topic
Corporate Debt
Illiquidity and Risk-Taking
Speaker
Zhan Shi
Assistant Professor,
PBC School of Finance, Tsinghua University
Abstract
We investigates the
influence of liquidity risk in debt market on shareholders’ behaviors. Upon the arrival of illiquidity
shocks, our model show that, in contrast to the literature (e.g. He and Xiong
2012), shareholders optimally increase asset volatility by adopting risky
projects rather than raising endogenous default boundary. The positive
relationship between illiquidity and risk-taking is more pronounced when firms
face more rollover risk. We document profound empirical evidence to support our
theoretical implications. Our findings reveal the dark side of the externality
of trading frictions in debt market on the agency problem and also challenge
the view that short-term debt alleviates firms’ risk-taking agency problem.
