Optimal capital structure and credit spread under incomplete information

摘要

This paper builds a novel learning model by incorporating information incompleteness to extend the traditional capital structure tradeoff theories. We find that myopic agents without learning will make a more conservative debt policy, which provides an alternative explanation for the long-standing under-leveraged puzzle. Also, we find learning under incomplete information additionally generates premiums on corporate-debt yield spread. Overall, this paper extends capital structure literature from the perspective of learning, under incomplete information and contributes to explain the under-leveraged nature of most firms.