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The Flip Side of Financial Synergies: Coinsurance Versus Risk Contamination

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This paper characterizes when joint financing of two projects through debt increases
expected default costs, contrary to conventional wisdom. Separate financing dominates joint
financing when risk-contamination losses—that are associated with the contagious default
of a well-performing project that is dragged down by the other project’s poor performance—
outweigh standard coinsurance gains. Separate financing becomes more attractive than
joint financing when the fraction of returns lost under default increases and when projects
have lower mean returns, higher variability, more positive correlation, and more negative
skewness. These predictions are broadly consistent with evidence on conglomerate mergers,
spinoffs, project finance, and securitization.

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Informasi Detail

Judul Seri

The Review of Financial Studies

No. Panggil

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Penerbit

: Oxford University Press on behalf of The Society for Financial Studies., 2013

Deskripsi Fisik

The Review of Financial Studies / v 26 n 12 2013

Bahasa

English

ISBN/ISSN

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Klasifikasi

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Tipe Isi

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Tipe Media

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Tipe Pembawa

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Edisi

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Subjek

EKONOMI

Info Detail Spesifik

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Pernyataan Tanggungjawab

agus

Versi lain/terkait

Lampiran Berkas

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