, stochastic environment. Keeping the firm as an ongoing concern has an option value but equity and debt holders value it … option approach, we characterize the resulting agency costs of debt, derive the ‘price’ of these costs and analyse their … dynamics. We also show how agency costs can be reduced by the design of debt and the possibility of renegotiation. …

their informational advantage in the future. We point out that the strategic use of debt by an uninformed party induces … that (renegotiable) debt is a credible commitment to end the long-term relationship if information is not revealed. We show … that the strategic advantage of debt increases with good durability and we briefly address the financing decision of a …