Capital Structure and Debt Priority

Material TypeArticleLanguageEnglish
TitleCapital Structure and Debt Priority Author(S)Sami Attaoui (Author)
Abstract  We study a defaultable firm's debt priority structure in a simple structural model where the firm issues senior and junior bonds and is subject to both liquidity and solvency risks. Assuming that the absolute priority rule prevails and that liquidation is immediate upon default, we determine the firm's interior optimal priority structure along with its optimal capital structure. We also obtain closed-form solutions for the market values of the firm's debt and equity. ...Paginationp 737-736
SubjectManagementDescriptorsFinance
Journal TitleFinancial management  
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