Corporate Debt Illiquidity and Risk-Taking

活动时间:12月8日10:30 – 11:30

活动地点:Virtual Meeting through XYLink (小鱼易连)

活动演讲人: Zhan Shi



Corporate Debt Illiquidity and Risk-Taking


Zhan Shi

Assistant Professor, PBC School of Finance, Tsinghua University


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.