Jesse Davis
Institution
University of North Carolina - Chapel Hill
PhD Year
2016
Phone
919-962-3222
Jesse_Davis@kenan-flagler.unc.edu
FTG Membership
Member
Website
https://sites.google.com/site/davisjesse/
Featured Work
Feb 1, 2019
Learning in Financial Markets: Implications for Debt-Equity Conflicts
Despite the empirical prevalence of debt overhang, existing research has found little evidence of risk-shifting. To understand this discrepancy, we augment a traditional feedback model with an important feature: investors’ endogenous learning. We show that more ex-ante inefficient opportunities for risk-shifting encourage information acquisition. This lowers the ex-post likelihood a firm’s manager will choose such inefficient investments, attenuating risk-shifting. With debt overhang, this flips: more...
