In the shadow of failure: Asset preferences and competing interests in distressed firms
The question of how creditors influence firm investment decisions, and how shareholders compare to creditors in that regard, has received little attention in the literature. The agency costs of debt are examined, and a framework is proposed in which creditors and shareholders differ with respect to the types of asset holdings each prefers. Results reflect these distinctions, but also show that creditors exhibit asset preference distinctions depending upon the type of debt contract held. Implications of the research are discussed and directions for future research are suggested.
Donoher, William J. "In the Shadow of Failure: Asset Preferences and Competing Interests in Distressed Firms." Journal of Managerial Issues (2008): 178-194.
Journal of Managerial Issues