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Durham University

Research & business

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Publication details for Professor Muhammed-Shahid Ebrahim

Ebrahim, Muhammed-Shahid & Mathur, Ike (2001). The Pricing of Debt and Pareto-Optimal Financing under Endogenous Bankruptcy. International Journal of Theoretical and Applied Finance 4(3): 491-509.

Author(s) from Durham


Using an agency theoretical framework, this paper extends the optimal capital structure literature by modeling the rivalry between equity and debt to arrive at some very fundamental results involving endogeneity of bankruptcy, equilibrium interest rates, pricing of risk-free/risky debt and pareto-optimal financing techniques.