Starjournal Quotation Maksimovic, Vojislav, Zechner, Josef. 1991. Debt, Agency Costs and Industry Equilibrium. Journal of Finance 46 (5): S. 1619-1643.




We show that risk characteristics of projects' cash flows are endogenously determined by the investment decisions of all firms in an industry. As a result, in reasonable settings, financial structures which create incentives to expropriate debtholders by increasing risk are shown not to reduce value in an industry equilibrium. Without taxes, capital structure is irrelevant for individual firms despite its effect on the equityholders' incentives, but the maximum total amount of debt in the industry is determinate. Allowing for a corporate tax advantage of debt, capital structure becomes relevant but firms are indifferent between distinct alternative debt levels.


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Status of publication Published
Affiliation WU
Type of publication Journal article
Journal Journal of Finance
Citation Index SSCI
WU Journalrating 2009 A+
Starjournal Y
Language English
Title Debt, Agency Costs and Industry Equilibrium
Volume 46
Number 5
Year 1991
Page from 1619
Page to 1643
Reviewed? Y


Zechner, Josef (Details)
Maksimovic, Vojislav ( University of Maryland , United States/USA)
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