The Effects of Reversible Investment on Capital Structure and Credit Risks
提出了一个包含最优扩散机制切换的结构模型，研究投资可逆性如何影响企业的投资决策、资本结构和信用风险，发现可逆投资能降低杠杆率并缩小债券利差。
Abstract We propose a structural model with an optimal switching of diffusion regimes that integrates a wide range of investment reversibility. The default boundary and switching thresholds are endogenously determined, and they enable us to comprehend the interrelated problems of the investment decision, capital structure, and credit risks. We examine not only the under/overinvestment but also the under/overdisinvestment. The leverage ratio decreases when the firm has an option to invest in a reversible project, which can alleviate the capital structure puzzle. Furthermore, the model significantly reduces the wide dispersion of yield spreads depending on the credit grade of bonds.