| Summary: | 碩士 === 國立中央大學 === 財務金融研究所 === 96 === This study uses a uniform measure across a large sample of firms to analyze the actual existence of risk-shifting problem in large and small distressed firms. In addition to consider the effects of market-level and industry-level uncertainty on firm''s invesrment, we also take the effects of total firm uncertainty on firm''s investment into consideration to examine the risk-shifting behavior in large and small distressed firms. Our results provide the evidence of risk-shifting behavior in small distressed firms. Further, we use the maximum likelihood estimation method proposed by Duan(1994; 2000) to estimate the costs of risk-shifting. According to our estimation, the value of debt in small distressed firms is reduced by approximately 0.41%~0.55%, as the result of overinvestment in high uncertainty firm-specific investments. Moreover, we also find that the factors including secured debt, shorter maturity debt, and less growth options only have weaker effects on mitigating the risk-shifting behavior in small distressed firms.
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