Asset substitution(redirected from Asset Substitutions)
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.
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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved