New sse dissertation
This doctoral thesis consists of three independent empirical papers in financial economics. A unifying theme across all three papers is that they study real effects of corporate debt financing. Each paper investigates different real outcomes and various dimensions of debt financing.
The first paper has its background in how different types of institutional frameworks and specifically how the strength of creditor rights is one of the main determinants of the functioning of the credit market. It focuses on the institutional environment and the laws which govern the payoff profile for creditors when firms default. It studies how those laws impact different types of firms’ ability to borrow and ultimately how that affect the level of competition in different sectors.
The second paper has its foundation in the trade-off theory of capital structure, which suggest that firms weigh the advantages and disadvantages of debt when choosing their optimal capital structure. One potential, indirect, cost of high levels of debt financing is the inability of firms in financial distress to retain and attract skilled and important workers. The second paper test this hypothesis empirically.
The third paper moves beyond large-scale institutional frameworks and optimal levels of debt and into contractual features of debt. It analyzes how one agency cost of debt, debt overhang, can be mitigated through call options in corporate bonds. Under-investment through debt overhang is a situation when firms forego positive NPV investments as creditors capture enough of the upside to make it an unattractive investment for managers acting in the interest of shareholders. The third paper studies how fixed price callability, which caps the upside for bondholders, impacts investments.
The list of papers comprising this thesis is as follows.
"Collateral laws, credit supply and product market concentration"
"Talent in Distressed Firms: Investigating the Labor Costs of Financial Distress" (joint with Ramin Baghai, Rui Silva and Vikrant Vig)
"Issuer credit quality, callable bonds and debt overhang" (joint with Bo Becker, Murillo Campello and Dong Yan)
Viktor Thell is a reasercher at the Department of Finance at Stockholm School of Economics.