Posted: 19 Dec 2005 Last revised: 21 May 2017
This paper investigates debt-equity conflict in a firm, shows that shareholders can solve it by delegating project choice decisions to a risk-averse manager, and argues that managers' desire to build reputation may allow to solve this conflict even in firms with risk-neutral managers.
Suggested Citation: Suggested Citation
Khoroshilov, Yuri and Dodonova, Anna, Risk Aversion, Managerial Reputation and Debt-Equity Conflict. Finance Letters, February 2006. Available at SSRN: https://ssrn.com/abstract=870448