Research of Extending Maturity Date of Debt by Introducing Participation Ratios
Date Issued
2005
Date
2005
Author(s)
Lee, Kuan-Yin
DOI
zh-TW
Abstract
Since there is bankruptcy costs, bondholders intend to extend the maturity date of the debt to get higher pay-off when the debt is on the edge of default. Based on debt extension related models of Longstaff (1990) and Moraux & navatte’s (2004), this study introduces equity participation ratio of bondholder in to the previous models and derive analytical formulae for initial values of debt and equity. In addition, it can be used to explore the impacts on the values of both debt and equity holders under different participation ratios. We find that firm values increase significantly when introducing the mechanism of bondholder participation in debt extension period.
Subjects
展期債券
參與率
Extended bond
Participation Ratio
Type
thesis