DeMarzo, Peter M.; Fishman, Michael J. - In: Review of Financial Studies 20 (2007) 6, pp. 2079-2128
We develop an agency model of financial contracting. We derive long-term debt, a line of credit, and equity as optimal securities, capturing the debt coupon and maturity; the interest rate and limits on the credit line; inside versus outside equity; dividend policy; and capital structure...