Asset Substitution

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Asset substitution

Occurs when a firm invests in assets that are riskier than those that the debtholders expected.

Asset Substitution

A company's exchange of lower-risk investments for higher-risk investments. Firms may use asset substitution as a form of financing, or as a move to please shareholders. It can be detrimental to the company's bondholders as it increases the possibility of default without any corresponding benefit because bonds have a fixed interest rate. On the other hand, asset substitution can benefit shareholders as it carries the possibility of higher returns.

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Asset Substitution Problem Underinvestment Problem			This leads to asset substitution (Jensen and Meckling, 1976). Are debt and incentive compensation substitutes in controlling the ... by Zhang, Yilei / Financial Management Second, asset substitution in particular can produce "overinvestment," which occurs when a debtor's ability to shift downside risk onto creditors induces the debtor to invest in risky projects whose expected social value is negative. The case for symmetry in creditors' rights by Squire, Richard / Yale Law Journal The new Asset Substitution Product gives qualified borrowers a unique advantage. ARCS 'swap shop' gives borrowers an advantage by Real Estate Weekly			Asset Classes Asset Conservation, Lender Liability and Deposit Insurance Act of 1996 asset cost recovery system Asset Coverage Asset Coverage Ratio asset depreciation range Asset Depreciation Range System Asset Depreciation Risk Asset Financing Asset for Asset Swap Asset Impairment Asset Ledger asset management Asset Management Account Asset Motive Asset Play Asset Price Asset Pricing Model Asset Quality asset redeployment Asset Retirement Obligation Asset Sale Asset Share Value Asset Stripper Asset Stripping Asset Substitution Asset Substitution Problem Asset Sufficiency or Insufficiency Asset Swap Asset Turnover Asset Valuation Asset Valuation Reserve Asset Value Asset-Backed Alert Asset-Backed Bond Asset-Backed Commercial Paper Asset-Backed Fund Asset-Backed Security Asset-Based Finance Asset-Based Financing Asset-Conversion Loan Asset-Coverage Test Asset-Liability Committee Asset-Liability Gap Asset/Equity Ratio Asset/Liability Committee Asset/Liability Management Assets Assets and Valuation Assets Requirement Assets requirements			Asset Recovery Management Plan Asset Recovery Program Asset Recovery Service Provider Asset Redeployment Asset Redeployment Management System Asset Redeployment Team Asset Reliability Technology Asset Reporting Code Asset Requirement Asset retirement obligation Asset retirement obligation Asset Retirement Obligations Asset Rich, Income Poor Asset Sale Asset Sales Asset securitization Asset securitization Asset Sensitive Asset Servicing Technology Enhancement Project Asset Share Value Asset Share Values Asset Source for Software Engineering Technology Asset Source for Software Engineering Technology Asset Status Card Asset stripper Asset Strippers Asset stripping Asset stripping Asset stripping Asset Substitution Asset substitution problem Asset Sufficiency Asset Sufficiency or Insufficiency Asset swap Asset swap Asset Swap Convertible Option Trade Asset Swaps Asset TEMP Asset Test Asset Tests Asset Tracking and Accountability Control System Asset Tracking and Logistics Automated Support System Asset Tracking Logistics and Supply System Asset Transfer Asset Transfer Asset Transfer Asset Transfer Asset Transfer Asset Transfer Date Asset Transfers Asset Transfers Asset Transfers Asset Transfers Asset Transfers Asset turnover Asset turnover Asset Turnover Ratio Asset Turnover Ratios Asset Turnovers Asset Under Administration

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