Circumstance in which a company, or the shareholders of a company, choose not to invest in low-risk investments that would provide a safe cash flow for the benefit of holders of the company's debt, choosing instead to invest high-risk, higher-profit assets that increase their share value instead.
Related information about underinvestment problem:
- Underinvestment Problem Definition | Investopedia
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 ...
- The Underinvestment Problem, Bond Covenants, and Insurance
The underinvestment problem has been well known in finance since the ... the underinvestment problem are enjoyed by shareholders, their analysis does ...
- Underinvestment Problem - Financial Dictionary - The Free Dictionary
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.
- What is underinvestment problem? definition and meaning
Definition of underinvestment problem: Circumstance in which a company, or the shareholders of a company, choose not to invest in low-risk investments that ...
- The Underinvestment Problem and Corporate Derivatives Use
We analyze the underinvestment problem as a determinant of corporate hedging policy. We find ... underinvestment problem results when firms find that external ...
- Underinvestment problem Definition - NASDAQ.com
Underinvestment problem: read the definition of Underinvestment problem and 8000+ other financial and investing terms in the NASDAQ.com Financial ...
- Corporate Insurance and the Underinvestment Problem - JStor
control of a form of the underinvestment problem associated with casualty losses. ... corporate investment policy, not the underinvestment problem. The point ...
- Underinvestment Problem: Definition from Answers.com
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.