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    Rights statement: This is a pre-copy-editing, author-produced PDF of an article accepted for publication in Review of Finance following peer review. The definitive publisher-authenticated version is available online at: http://rof.oxfordjournals.org/content/17/1/321.abstract

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A theory of net debt and transferable human capital

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A theory of net debt and transferable human capital. / Lambrecht, Bart; Pawlina, Grzegorz.

In: Review of Finance, Vol. 17, No. 1, 01.2013, p. 321-368.

Research output: Contribution to journalJournal article

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Lambrecht, Bart ; Pawlina, Grzegorz. / A theory of net debt and transferable human capital. In: Review of Finance. 2013 ; Vol. 17, No. 1. pp. 321-368.

Bibtex

@article{7103b9f9488c4849957067800f6059bf,
title = "A theory of net debt and transferable human capital",
abstract = "Traditional theories of capital structure do not explain the puzzling phenomena of zero-leverage firms and negative net debt ratios. We develop a theory where firms adopt a net debt target that acts as a balancing variable between equityholders and managers. Negative (positive) net debt occurs in human (physical) capital intensive industries. Negative net debt arises because tradeable claims cannot be issued against transferable human capital. Heterogeneity in capital structure occurs when firms have debt that is not fully collateralized. Physical capital intensive firms take on high leverage but may underlever to avoid bankruptcy costs. This creates excess rents for managers (even if the supply of human capital is competitive) because wealth constraints prevent managers from co-investing.",
author = "Bart Lambrecht and Grzegorz Pawlina",
note = "This is a pre-copy-editing, author-produced PDF of an article accepted for publication in Review of Finance following peer review. The definitive publisher-authenticated version is available online at: http://rof.oxfordjournals.org/content/17/1/321.abstract",
year = "2013",
month = jan
doi = "10.1093/rof/rfs011",
language = "English",
volume = "17",
pages = "321--368",
journal = "Review of Finance",
issn = "1572-3097",
publisher = "Oxford University Press",
number = "1",

}

RIS

TY - JOUR

T1 - A theory of net debt and transferable human capital

AU - Lambrecht, Bart

AU - Pawlina, Grzegorz

N1 - This is a pre-copy-editing, author-produced PDF of an article accepted for publication in Review of Finance following peer review. The definitive publisher-authenticated version is available online at: http://rof.oxfordjournals.org/content/17/1/321.abstract

PY - 2013/1

Y1 - 2013/1

N2 - Traditional theories of capital structure do not explain the puzzling phenomena of zero-leverage firms and negative net debt ratios. We develop a theory where firms adopt a net debt target that acts as a balancing variable between equityholders and managers. Negative (positive) net debt occurs in human (physical) capital intensive industries. Negative net debt arises because tradeable claims cannot be issued against transferable human capital. Heterogeneity in capital structure occurs when firms have debt that is not fully collateralized. Physical capital intensive firms take on high leverage but may underlever to avoid bankruptcy costs. This creates excess rents for managers (even if the supply of human capital is competitive) because wealth constraints prevent managers from co-investing.

AB - Traditional theories of capital structure do not explain the puzzling phenomena of zero-leverage firms and negative net debt ratios. We develop a theory where firms adopt a net debt target that acts as a balancing variable between equityholders and managers. Negative (positive) net debt occurs in human (physical) capital intensive industries. Negative net debt arises because tradeable claims cannot be issued against transferable human capital. Heterogeneity in capital structure occurs when firms have debt that is not fully collateralized. Physical capital intensive firms take on high leverage but may underlever to avoid bankruptcy costs. This creates excess rents for managers (even if the supply of human capital is competitive) because wealth constraints prevent managers from co-investing.

U2 - 10.1093/rof/rfs011

DO - 10.1093/rof/rfs011

M3 - Journal article

VL - 17

SP - 321

EP - 368

JO - Review of Finance

JF - Review of Finance

SN - 1572-3097

IS - 1

ER -