The 29th Academic Luncheon of the Digital Technology and Finance

Abstract：

We develop a dynamic trade-off model to explore how shareholders' risk-taking incentives interact with firms' debt structure choices over the business cycle. The use of both bank and market debt exacerbates the ex-post risk-taking problem compared to relying solely on market debt, particularly under larger recessionary shocks. Macroeconomic risk amplifies the sensitivity of firms' debt structure decisions to shareholders' risk-taking incentives. Firms optimally increase their reliance on bank debt when facing lower systematic risk exposure, when confronted with larger recessionary shocks, or when macroeconomic conditions deteriorate. Finally, we find that macroeconomic risk is a critical factor in shaping the relationship between shareholders' bargaining power and firms' optimal debt structure decisions.

Speaker Introduction：

Xin Xia, Associate Professor at the School of Finance, Zhongnan University of Economics and Law, holds a Ph.D. in Economics. His current main research directions include corporate finance, asset pricing, and the theory of technology finance. He has published multiple papers in domestic and international mainstream academic journals such as Journal of Management Science in China, Chinese Journal of Management Science, Journal of Corporate Finance, and European Financial Management, either as the first author or the sole corresponding author. His research achievements have received funding support from the Innovative Project for Ph.D. Candidates in Contemporary Economics. Currently, he is hosting a Youth Project funded by the National Natural Science Foundation of China.