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Moral Hazard and Efficiency in General Equilibrium with Anonymous Trading

Acemoglu, Daron; Simsek, Alp - C.E.P.R. Discussion Papers - 2010

A 'folk theorem' originating, among others, in the work of Stiglitz maintains that competitive equilibria are always or 'generically' inefficient (unless contracts directly specify consumption levels as in Prescott and Townsend, thus bypassing trading in anonymous markets). This paper critically...

Persistent link: https://www.econbiz.de/10008468520

Credit mismatch and breakdown

Becsi, Zsolt; Li, Victor E.; Wang, Ping - In: European Economic Review 59 (2013) C, pp. 109-125

This paper studies the phenomenon of mismatch in a decentralized credit market where borrowers and lenders must engage in costly search to establish credit relationships. Our dynamic general equilibrium framework integrates incentive based informational frictions with a matching process...

Persistent link: https://www.econbiz.de/10010688154

The influence of moral hazard on investment in financially constrained and unconstrained firms

Keefe, Michael O’Connor; Kieschnick, Robert - In: Finance Research Letters 11 (2014) 3, pp. 272-281

We extend Triole (2006) to link together two seemingly different cases – firms facing potential free cash flow problems versus firms facing financial constraints. The model predicts a large number of disparate findings in the empirical literature and so demonstrates its usefulness.

Persistent link: https://www.econbiz.de/10010940017

Financing capacity with stealing and shirking

Véricourt, Francis de; Gromb, Denis - In: Management science : journal of the Institute for … 65 (2019) 11, pp. 5128-5141

Persistent link: https://www.econbiz.de/10012125937

Chapter 2. Agency, Information and Corporate Investment

Stein, Jeremy C. - 2003

This essay surveys the body of research that asks how the efficiency of corporate investment is influenced by problems … that the marginal return to investment in firm i is the same as the marginal return to investment in firm j ? Second, do … capital budgeting process get within-firm allocations right, so that the marginal return to investment in firm i ’s division A …

Persistent link: https://www.econbiz.de/10014023874

Endogenous Collateral Constraints and the Leverage Cycle

Fostel, Ana; Geanakoplos, John - In: Annual Review of Economics 6 (2014) 1, pp. 771-799

We review the theory of leverage developed in collateral equilibrium models with incomplete markets. We explain how leverage tends to boost asset prices and create bubbles. We show how leverage can be endogenously determined in equilibrium and how it depends on volatility. We describe the...

Persistent link: https://www.econbiz.de/10010886189

Asset Pricing with Countercyclical Household Consumption Risk

Constantinides, George M.; Ghosh, Anisha - National Bureau of Economic Research (NBER) - 2014

We present evidence that shocks to household consumption growth are negatively skewed, persistent, countercyclical, and play a major role in driving asset prices. We construct a parsimonious model where heterogeneous households have recursive preferences and a single state variable drives the...

Persistent link: https://www.econbiz.de/10010951334

Public versus private provision of liquidity: Is there a trade-off?

Röhrs, Sigrid; Winter, Christoph - In: Journal of Economic Dynamics and Control 53 (2015) C, pp. 314-339

To what extent is public debt private liquidity? Much policy advice given in the aftermath of the financial crisis rests on the assumption that increasing public debt relaxes borrowing constraints of private households. This is the case for ad-hoc debt limits, which are exogenous to public...

Persistent link: https://www.econbiz.de/10011209205

Putting the Brakes on Sudden Stops: The Financial Frictions-Moral Hazard Tradeoff of Asset Price Guarantees

Mendoza, Enrique G.; Durdu, C. Bora - National Bureau of Economic Research (NBER) - 2004

The hypothesis that Sudden Stops to capital inflows in emerging economies may be caused by global capital market frictions, such as collateral constraints and trading costs, suggests that Sudden Stops could be prevented by offering price guarantees on the emerging-markets asset class. Providing...

Persistent link: https://www.econbiz.de/10005084668

Evaluating Asset Pricing Models with Limited Commitment using Household Consumption Data

Krueger, Dirk; Lustig, Hanno; Perri, Fabrizio - National Bureau of Economic Research (NBER) - 2007

We evaluate the asset pricing implications of a class of models in which risk sharing is imperfect because of limited enforcement of intertemporal contracts. Lustig (2004) has shown that in such a model the asset pricing kernel can be written as a simple function of the aggregate consumption...

Persistent link: https://www.econbiz.de/10005084749

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