Debt and Input Misallocation

MOSHE KIM; VOJISLAV MAKSIMOVIC

doi:10.1111/j.1540-6261.1990.tb05106.x

Debt and Input Misallocation

MOSHE KIM, VOJISLAV MAKSIMOVIC

Department of Economics

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

Abstract

We investigate a class of agency costs of debt that arise because debt financing affects the firm's incentives to use inputs efficiently. A methodology for estimating this class of costs is presented and applied to a major industry, air transport. Our results are consistent with agency models that predict a decrease in efficiency as the debt increases. A part of the loss of efficiency that we identify is attributable to the greater use by levered firms of inputs that can be monitored and are collateralizable. 1990 The American Finance Association

Original language	English
Pages (from-to)	795-816
Number of pages	22
Journal	Journal of Finance
Volume	45
Issue number	3
DOIs	https://doi.org/10.1111/j.1540-6261.1990.tb05106.x
State	Published - Jul 1990

ASJC Scopus subject areas

Accounting
Finance
Economics and Econometrics

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10.1111/j.1540-6261.1990.tb05106.x

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Debt and Input Misallocation

Abstract

ASJC Scopus subject areas

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