The Financing and Redeployment of Specific Assets
We model the role various forms of nonrecourse secured debt play in efficiently redeploying assets whose value is state-specific. Ex ante, an entrepreneur and an asset redeployer make noncontractible state-specific investments in the primary and next-best uses of an asset, respectively. The redeployer provides a secured nonrecourse loan equal to the value of the asset in the critical state that separates the good and bad states. In the event of a bad state, this contract averts ex post bargaining over the asset's quasi-rents on redeployment and leaves the parties' ex ante investments undistorted. Copyright The American Finance Association 1999.
Year of publication: |
1999
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Authors: | Habib, Michel A. ; Johnsen, D. Bruce |
Published in: |
Journal of Finance. - American Finance Association - AFA, ISSN 1540-6261. - Vol. 54.1999, 2, p. 693-720
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Publisher: |
American Finance Association - AFA |
Saved in:
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