A risk-averse firm faces uncertainty about the spot price of the output, but has access to a futures market. The technology requires both capital and labor to produce the output. Due to the presence of flexibility in production, the level of capital and the volume of futures contracts are chosen...

In this paper, we present a minimalist version of a model of bond financing and debt, imbedded in a stepwise dynamic CGE model. The proposed specification takes into account the main characteristics of bond financing. Bonds compete on the securities market with shares, so that the yield demanded...

This paper proposes a new nonparametric test for conditional independence, which is based on the comparison of Bernstein copula densities using the Hellinger distance. The test is easy to implement because it does not involve a weighting function in the test statistic, and it can be applied in...

Dans ce texte, nous présentons une version minimaliste d'un modèle de la dette obligataire qui s'inscrit dans un modèle d'équilibre général calculable dynamique séquentiel. La spécification proposée tient compte des caractéristiques suivantes des obligations: -elles sont émises à une...

We investigate the empirical relation between competition and corporate governance and the effect of country characteristics on this relation. We find that competition is associated with strong corporate governance, but only in less developed countries. We next examine the impact of corporate...

The new NYSE rules for corporate governance require the audit committee to discuss and review the firm's risk assessment and hedging strategies. They also put additional requirements for the composition and the financial knowledge of the directors sitting on the board and on the audit committee....

It is established that the standard principal-agent model cannot explain the structure of commonly used CEO compensation contracts if CRRA preferences are postulated. However, we demonstrate that this model has potentially a high explanatory power with preferences with decreasing relative risk...

We present a novel theory to explain the puzzling issue regarding why certain firms in financial distress, that must renegotiate their debt prefer a formal bankruptcy procedure, which is more costly, over direct negotiations with their debtholders. Specifically, we show that claimholders’...

Given equity’s convex payoff function, shareholders can transfer wealth from bondholders by increasing firm risk. We test the existing hypothesis that convertible debt reduces this classical agency problem of risk-shifting. First, we derive a measure of shareholders’ risk incentives induced...

We analyze firms’ entry, production and hedging decisions under imperfect competition. We consider an oligopoly industry producing a homogeneous output in which risk-averse firms face an entry cost upon entering the industry, and then compete in Cournot with one another. Each firm faces...