The DOI matches its Crossref record; 1 of the 1 references it cites were found in a registry or an index.
The expected cost of default
Open accessAbstract
The sample of observed defaults significantly understates the average firm׳s true expected cost of default due to a sample selection bias. I use a dynamic capital structure model to estimate firm-specific expected default costs and quantify the selection bias. The average firm expects to lose 45% of firm value in default, a cost higher than existing estimates. However, the average cost among defaulted firms in the estimated model is only 25%, a value consistent with existing empirical estimates from observed defaults. This substantial selection bias helps to reconcile the levels of leverage and default costs observed in the data.
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Cites
Miller, M. H. (1977) · The Journal of Finance · doi:10.1111/j.1540-6261.1977.tb03267.x · Cited by 2,898
Cited by
Dynamic Models and Structural Estimation in Corporate Finance
Strebulaev, I. A. (2011) · Foundations and Trends® in Finance · doi:10.1561/0500000035 · Cited by 259
Metadata
- Authors
- Glover, B.
- Venue
- Journal of Financial Economics
- Publisher
- Elsevier BV
- Published
- 2016-02
- Volume
- 119
- Issue
- 2
- Pages
- 284-299
- ISSN
- 0304-405X (ISSN-L)
- OpenAlex
- W1852458464
- Cited by
- 213
- References
- 1
- FWCI
- 92.84
- Type
- journal article
- Language
- en
- Open access
- green
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Contains information from the Semantic Scholar Academic Graph Datasets, made available under the ODC Attribution License (ODC-BY 1.0).
Semantic Scholar’s data is described in: Kinney, R., et al. (2023). The Semantic Scholar Open Data Platform. arXiv:2301.10140.
