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Sunk investment, bargaining, and choice of capital structure

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Sunk investment, bargaining, and choice of capital structure. / Dasgupta, Sudipto; Sengupta, Kunal.
In: International Economic Review, Vol. 34, No. 1, 02.1993, p. 203-220.

Research output: Contribution to Journal/Magazine › Journal article › peer-review

Harvard

Dasgupta, S & Sengupta, K 1993, 'Sunk investment, bargaining, and choice of capital structure', International Economic Review, vol. 34, no. 1, pp. 203-220. https://doi.org/10.2307/2526957

APA

Dasgupta, S., & Sengupta, K. (1993). Sunk investment, bargaining, and choice of capital structure. International Economic Review, 34(1), 203-220. https://doi.org/10.2307/2526957

Vancouver

Dasgupta S, Sengupta K. Sunk investment, bargaining, and choice of capital structure. International Economic Review. 1993 Feb;34(1):203-220. doi: 10.2307/2526957

Author

Dasgupta, Sudipto ; Sengupta, Kunal. / Sunk investment, bargaining, and choice of capital structure. In: International Economic Review. 1993 ; Vol. 34, No. 1. pp. 203-220.

Bibtex

@article{bfb99fbaae004f53bef5d88f1784e5c7,
title = "Sunk investment, bargaining, and choice of capital structure",
abstract = "This paper shows how a firm might optimally choose debt to affect theoutcome of bilateral bargaining with workers or other input suppliers. It isshown that debt may alleviate the well known underinvestment problemassociated with the inability to write precommitment contracts. Also, in suchcircumstances, debt could be Pareto improving over complete equity financing.The relationship between the optimal level of debt and asset specificity ofinvestment and bargaining power of the firm vis-a-vis the workers is explored.The Williamson conjecture that higher asset specificity will lead to less debt isshown not to be valid in general.",
author = "Sudipto Dasgupta and Kunal Sengupta",
year = "1993",
month = feb,
doi = "10.2307/2526957",
language = "English",
volume = "34",
pages = "203--220",
journal = "International Economic Review",
issn = "0020-6598",
publisher = "WILEY-BLACKWELL PUBLISHING, INC",
number = "1",

}

RIS

TY - JOUR

T1 - Sunk investment, bargaining, and choice of capital structure

AU - Dasgupta, Sudipto

AU - Sengupta, Kunal

PY - 1993/2

Y1 - 1993/2

N2 - This paper shows how a firm might optimally choose debt to affect theoutcome of bilateral bargaining with workers or other input suppliers. It isshown that debt may alleviate the well known underinvestment problemassociated with the inability to write precommitment contracts. Also, in suchcircumstances, debt could be Pareto improving over complete equity financing.The relationship between the optimal level of debt and asset specificity ofinvestment and bargaining power of the firm vis-a-vis the workers is explored.The Williamson conjecture that higher asset specificity will lead to less debt isshown not to be valid in general.

AB - This paper shows how a firm might optimally choose debt to affect theoutcome of bilateral bargaining with workers or other input suppliers. It isshown that debt may alleviate the well known underinvestment problemassociated with the inability to write precommitment contracts. Also, in suchcircumstances, debt could be Pareto improving over complete equity financing.The relationship between the optimal level of debt and asset specificity ofinvestment and bargaining power of the firm vis-a-vis the workers is explored.The Williamson conjecture that higher asset specificity will lead to less debt isshown not to be valid in general.

U2 - 10.2307/2526957

DO - 10.2307/2526957

M3 - Journal article

VL - 34

SP - 203

EP - 220

JO - International Economic Review

JF - International Economic Review

SN - 0020-6598

IS - 1

ER -