This paper studies the interaction between fundamental and liquidity for defaultable corporate bonds that are traded in an over-the-counter secondary market with search frictions. Bargaining with dealers determines a bond's endogenous liquidity, which depends on both the firm fundamental and the...

We introduce uncertainty into Holmstrom and Milgrom (1987) to study optimal long-term contracting with learning. In a dynamic relationship, the agent's shirking not only reduces current performance, but also increases the agent's information rent due to the persistent belief manipulation effect....

We study a dynamic setting in which a firm chooses its debt maturity structure and default timing endogenously, both without commitment. The firm, who is waiting for the arrival of an upside event, commits to keep its outstanding bond face-values constant, but controls its debt maturity...