Capital Structure and Default Risk

• 발행기관: 한국유통과학회
• 저자명: Sehrish GUL Hyun-Rae CHO
• 간행물 정보: 『The Journal of Asian Finance, Economics and Business(JAFEB)』Vol. 6 No.2, 15~24쪽, 전체 10쪽
• 주제분류: 경제경영 > 경제학
• 파일형태: PDF
• 발행일자: 2019.04.30

영문 초록

This study analyzes the effect of the capital structure of Korean manufacturing firms on default risk based on Moody’s KMV option pricing model where the probability of default is obtained by measuring the distance to default as a covariant in logit model developed by Merton (1974). Based on the panel data of manufacturing firms, this study achieves its primary objective, using a fixed effect regression model and examines the effect of a firm’s capital structure on default risk amongst publicly listed firms on Korea exchange during 2005-2016. Empirical results obtained suggest that the rise in short-term debt to assets leads to increase the risk of default whereas the increase in long-term debt to assets leads to decrease the default risk. The benefits of short-term debt financing over a short-term period fade out in the presence of information asymmetry. However, long-term debt financing overcomes the information asymmetry and enjoys the paybacks of tax advantage associated with long-term debt. Additionally, size, tangibility and interest coverage ratio are also the important determinants of default risk. Findings support the trade-off theory of capital structure and recommend the optimal use of long-term debt in a firm’s capital structure.

목차

1. Introduction

2. Literature Review

3. Research Methodology

4. Research Analysis

5. Conclusion

References

키워드

Capital Structure Default Risk Korean Stock Market Merton’s Model Moody’s KMV