The DOI matches its Crossref record; 78 of the 78 references it cites were found in a registry or an index.
Empirical Evidence of Risk Shifting in Financially Distressed Firms
Abstract
This paper provides evidence of risk‐shifting behavior in the investment decisions of financially distressed firms. Using a real options framework, I show that shareholders' risk‐shifting incentives can reverse the expected negative relation between volatility and investment. I test two hypotheses that are consistent with risk‐shifting behavior: (i) volatility has a positive effect on distressed firms' investment; (ii) investments of distressed firms generate less value during times of high uncertainty. Empirical evidence using 40 years of data supports both hypotheses. I further evaluate the effect of various firm characteristics on risk shifting, and estimate the costs of the investment distortion.
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Cites
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Cited by
Accounting discretion, loan loss provisioning, and discipline of Banks’ risk-taking
Bushman, R. M., & Williams, C. D. (2012) · Journal of Accounting and Economics · doi:10.1016/j.jacceco.2012.04.002 · Cited by 784
The effects of financial reporting and disclosure on corporate investment: A review
Roychowdhury, S., Shroff, N., & Verdi, R. S. (2019) · Journal of Accounting and Economics · doi:10.1016/j.jacceco.2019.101246 · Cited by 749
The Real and Financial Implications of Corporate Hedging
CAMPELLO, M., LIN, C., MA, Y., & ZOU, H. (2011) · The Journal of Finance · doi:10.1111/j.1540-6261.2011.01683.x · Cited by 353
Policy uncertainty, investment, and the cost of capital
Drobetz, W., El Ghoul, S., Guedhami, O., & Janzen, M. (2018) · Journal of Financial Stability · doi:10.1016/j.jfs.2018.08.005 · Cited by 341
Corporate financial and investment policies when future financing is not frictionless
Almeida, H., Campello, M., & Weisbach, M. S. (2011) · Journal of Corporate Finance · doi:10.1016/j.jcorpfin.2009.04.001 · Cited by 320
Metadata
- Authors
- EISDORFER, A.
- Venue
- The Journal of Finance
- Publisher
- Wiley
- Published
- 2008-04
- Volume
- 63
- Issue
- 2
- Pages
- 609-637
- ISSN
- 0022-1082 (ISSN-L)
- 1540-6261
- OpenAlex
- W2134760438
- Cited by
- 358
- References
- 78
- FWCI
- 40.59
- Type
- journal article
- Language
- en
- Open access
- closed
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- EISDORFER, A. (2008). Empirical Evidence of Risk Shifting in Financially Distressed Firms. The Journal of Finance. https://doi.org/10.1111/j.1540-6261.2008.01326.x
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Bibliographic data: Semantic Scholar, OpenAlex, Crossref.
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.
