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The Liquidation Decision as a Principal Agent Problem

  • Peter Swoboda

Summary

Substantial insights into the capital structure problem can be won if it is understood as a principal agent problem. Many principals (equity holders, debt holders, customers, tax authority etc.) employ or are dependent on an agent or a group of agents (managers). In this paper a special aspect of this comprehensive principal agent problem is analyzed: the influence of financial structure on the liquidation decision of the firm. In chapter 2 only debt holders as principals are considered. In chapter 3 a further group of principals, the customers, are introduced. Titman (1984) was the first to deal with the influence of the claims of customers on the liquidation decision. Therefore, in a first step the problem as formulated and solved by Titman (1984) is presented and it is shown that his solution is deficient. In a second step alternative solutions are considered. The concluding remarks in chapter 4 refer to the introduction of still further principals into the analysis.

Keywords

Agency Cost Equity Financing Debt Financing Equity Holder Equity Owner 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© Springer-Verlag Berlin · Heidelberg 1987

Authors and Affiliations

  • Peter Swoboda

There are no affiliations available

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