asset substitution

Fin
the purchase of assets that involve more risk than those a lender expected the borrower to buy

The ultimate business dictionary. 2015.

Look at other dictionaries:

  • Asset substitution — A firm s investing in assets that are riskier than those that the debtholders expected. The New York Times Financial Glossary …   Financial and business terms

  • asset substitution — Occurs when a firm invests in assets that are riskier than those that the debtholders expected. Bloomberg Financial Dictionary …   Financial and business terms

  • 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

  • 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

  • Capital asset pricing model — In finance, the Capital Asset Pricing Model (CAPM) is used to determine a theoretically appropriate required rate of return of an asset, if that asset is to be added to an already well diversified portfolio, given that asset s non diversifiable… …   Wikipedia

  • Capital structure — Gearing ratio redirects here. For the mechanical concept, see gear ratio. Finance Financial markets …   Wikipedia

  • 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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