THE AGENCY COST RATIONALE FOR REFUNDING DISCOUNTED BONDS

Dan S. Dhaliwal

doi:10.1111/j.1475-6803.1985.tb00424.x

THE AGENCY COST RATIONALE FOR REFUNDING DISCOUNTED BONDS

Dan S. Dhaliwal

Accountancy, School of

Research output: Contribution to journal › Article › peer-review

1 Scopus citations

Abstract

The purpose of this paper is to enhance the understanding of management's motivation for engaging in debt‐for‐debt exchange offers where new long‐term debt with a higher coupon rate is substituted for outstanding debt that is trading at a substantial discount. Some previously advanced arguments that imply a positive effect of such refunding of debt are examined, and their weaknesses are discussed. Then an alternative argument utilizing agency cost theory is advanced, and empirical results are presented to support this alternative argument.

Original language	English (US)
Pages (from-to)	43-50
Number of pages	8
Journal	Journal of Financial Research
Volume	8
Issue number	1
DOIs	https://doi.org/10.1111/j.1475-6803.1985.tb00424.x
State	Published - 1985

ASJC Scopus subject areas

Accounting
Finance

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10.1111/j.1475-6803.1985.tb00424.x

Cite this

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THE AGENCY COST RATIONALE FOR REFUNDING DISCOUNTED BONDS

Abstract

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