Ugur, Mehmet ORCID: 0000-0003-3891-3641, Solomon, Edna and Zeynalov, Ayaz (2020) Leverage, Competition, and Financial Distress Hazard: Non-Monotonic Effects in the Presence of Agency Costs. [Working Paper]

PDF (Author Submitted Manuscript) 28304 UGUR_Leverage, Competition, and Financial Distress Hazard_2020.pdf - Submitted Version Restricted to Registered users only Download (853kB) | Request a copy

Abstract

This paper investigates the effects of leverage and product-market competition on financial distress in the presence of agency costs. We demonstrate that leverage and competition have non-monotonic and substitute disciplining effects on managerial slack and financial distress hazard. We take account of potential endogeneity due to the correlation of frailty with the regressors and conduct a wide range of sensitivity checks. Our approach bridges the gap between theory and empirics, offers new avenues for financial distress modelling, and can be applied to other event histories such as corporate defaults or credit downgrades.

Item Type:	Working Paper
Additional Information:	Under review in Journal of Banking and Finance
Uncontrolled Keywords:	Financial distress; competition; leverage; hazard modelling
Subjects:	H Social Sciences > HB Economic Theory
Faculty / School / Research Centre / Research Group:	Faculty of Business Faculty of Business > Department of International Business & Economics Faculty of Business > Institute of Political Economy, Governance, Finance and Accountability (IPEGFA) Faculty of Business > Institute of Political Economy, Governance, Finance and Accountability (IPEGFA) > Greenwich Political Economy Research Centre (GPERC)
Last Modified:	04 Aug 2021 16:33
URI:	http://gala.gre.ac.uk/id/eprint/28304

Actions (login required)

View Item

Downloads