And this will is likely to be especially critical in a time of crisis, again because of the increased prominence of the debt-overhang problem.7 A firm that is told that it needs to improve its capital position will, given the interests of its shareholders, strongly prefer to do so by reducing assets rather than by engaging in a dilutive share issue, even though the latter is more desirable from the perspective of aggregate credit provision.
And it can be expected to make its case forcefully.