Arbeitspapier
Disputes, debt and equity
We show how the prospect of disputes over firms' revenue reports promotes debt financing over equity. These findings are presented within a costly state verification model with a risk averse entrepreneur. The prospect of disputes encourages incentive contracts that limit penalties and avoid stochastic monitoring, even when the lender can commit to stochastic monitoring strategies. Consequently, optimal contracts shift away from equity and toward standard debt. For a useful special case of the model, closed form solutions are presented for leverage and consumption allocations under efficient debt contracts. Some empirical implications of the theory are pursued.
- Sprache
-
Englisch
- Erschienen in
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Series: School of Economics Discussion Papers ; No. 1716
- Klassifikation
-
Wirtschaft
Incomplete Markets
General Equilibrium and Disequilibrium: Financial Markets
Asymmetric and Private Information; Mechanism Design
Economics of Contract: Theory
- Thema
-
Microeconomics
costly state verification
external finance
leverage
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Duncan, Alfred
Nolan, Charles
- Ereignis
-
Veröffentlichung
- (wer)
-
University of Kent, School of Economics
- (wo)
-
Canterbury
- (wann)
-
2017
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:44 MEZ
Datenpartner
Dieses Objekt wird bereitgestellt von:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
Objekttyp
- Arbeitspapier
Beteiligte
- Duncan, Alfred
- Nolan, Charles
- University of Kent, School of Economics
Entstanden
- 2017
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