Asset Substitution Problem

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Definition: Asset Substitution Problem

Asset Substitution Problem
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Full Definition of Asset Substitution Problem

A situation which occurs when shareholders prompt a company to invest in assets that are riskier than what bondholders want (asset substitution). The newer, riskier investment potentially increases the return that shareholders will see from their stock, while increasing the risk that bondholders will bear due to the increased risk of bankruptcy.

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https://payrollheaven.com/define/asset-substitution-problem/
Modern Language Association (MLA):
Asset Substitution Problem. PayrollHeaven.com. Payroll & Accounting Heaven Ltd.
April 19, 2024 https://payrollheaven.com/define/asset-substitution-problem/.
Chicago Manual of Style (CMS):
Asset Substitution Problem. PayrollHeaven.com. Payroll & Accounting Heaven Ltd.
https://payrollheaven.com/define/asset-substitution-problem/ (accessed: April 19, 2024).
American Psychological Association (APA):
Asset Substitution Problem. PayrollHeaven.com. Retrieved April 19, 2024
, from PayrollHeaven.com website: https://payrollheaven.com/define/asset-substitution-problem/

Definition Sources

Definitions for Asset Substitution Problem are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 20th November, 2021 | 0 Views.