Journal of Finance to Publish Research by Jie Yang
December 02, 2010
Jie Yang, assistant professor of finance at Georgetown University’s McDonough School of Business, is the co-author of the article “The Cost of Debt,” which will be published in the December 2010 issue of the Journal of Finance.
Yang and co-authors Jules van Binsbergen and John Graham estimate firm-specific marginal cost of debt curves and determine that the optimal capitalized net benefits of debt are about 3.5 percent of asset value on average. They also find that the cost of overlevering is greater than the cost of underlevering, and that the default cost of debt amounts to approximately half the total cost of debt, meaning that agency and other nondefault costs contribute about half of the total ex ante costs of debt.