What determines securitization levels, and should they be regulated? To address these questions we develop a model where originators can exert unobservable effort to increase expected asset quality, subsequently having private information regarding quality when selling ABS to rational investors....

Purpose – This paper focuses on the decision by firms to commit and to invest unilaterally. It is concerned with the intriguing question as to whether unilateral commitments are mechanisms that help a firm manage risks in alliance relationships in a proactive manner....

Purpose – Strategic alliances are often described as risky, dangerous, and instable. When firms adopt these strategies, they are confronted with a relational risk. Nevertheless, little empirical work has been down on relational risk in alliances. For this reason, this research is founded and...

When firms use alliance relationships, important decisions they must make concern: (1) How the alliance should develop in order to accomplish the parent firms’ objectives; (2) How they can manage relational risks in the alliance relationship. In order to find an answer to these problems,...

The paper draws lessons from the experience of the past year for the conduct of central banks in the pursuit of macroeconomic and financial stability. Macroeconomic stability is defined as either price stability or as price stability and sustainable output or employment growth. Financial...

Corporate finance theories suggest that problems of asymmetric information and moral hazard in credit markets can be addressed by choosing short-term maturities. Theories of debt renegotiation suggest that the credibility of the implicit commitment to not make concessions to insolvent borrowers,...

This paper examines the choice of tools for managing a firm’s operational risks: cash reserves, insurance contracts, and financial assets under an optimal financing contract that solves moral hazard between insiders and outside investors. Risk management is valuable as it reduces the costs of...

We analyze the degree of contract completeness with respect to staging of venture capital investments using a hand-collected German data set of contract data from 464 rounds into 290 entrepreneurial firms. We distinguish three forms of staging (pure milestone financing, pure round financing and...

Two agents sequentially contracts with different principals under moral hazard. If agents care for one another, the second principal gains by insuring them over first wages. Even with independent tasks, the first principal must offer riskier payments to induce effort.

This paper provides a method to prove existence of solutions to some moral hazard problems with infinite set of outcomes. The argument is based on the concept of nondecreasing rearrangement and on a supermodular version of Hardy–Littlewood’s inequality. The method also provides qualitative...