Risk Aversion, Managerial Reputation and Debt-Equity Conflict
University of Ottawa, Telfer School of Management
University of Ottawa - Telfer School of Management
Finance Letters, February 2006
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.
Date posted: December 19, 2005 ; Last revised: April 13, 2010