- asset substitution problem
- Arises when the stockholders substitute riskier assets for the firm's existing assets and expropriate value from the debtholders. Bloomberg Financial Dictionary
Financial and business terms. 2012.
asset substitution problem
Look at other dictionaries:
Asset Substitution Problem — A problem that arises when a company exchanges its low risk assets for high risk investments. This substitution transfers value from a firm s bondholders to its shareholders. The transfer of assets places more risk on the debt holders without… … Investment dictionary
Asset substitution problem — Arises when the stockholders substitute riskier assets for the firm s existing assets and expropriate value from the debtholders. The New York Times Financial Glossary … Financial and business terms
Underinvestment Problem — An agency problem where a company refuses to invest in low risk assets, in order to maximize their wealth at the cost of the debt holders. Low risk projects provide more security for the firm s debt holders, since a steady stream of cash can be… … Investment dictionary
Underinvestment problem — The mirror image of the asset substitution problem, wherein stockholders refuse to invest in low risk assets to avoid shifting wealth from themselves to the debtholders. The New York Times Financial Glossary … Financial and business terms
underinvestment problem — The mirror image of the asset substitution problem, in that stockholders refuse to invest in low risk assets to avoid shifting wealth from themselves to debtholders. Bloomberg Financial Dictionary … Financial and business terms
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