We study a dynamic contracting problem in which size is relevant. The agent may take on excessive risk to enhance short … curb risk taking. Firms that are less prone to risk taking can afford a higher leverage …

insurance by strictly-risk averse agents and risk-neutral firms when they enjoy limited liability. When exposed to a bankrupting …

risk. In this model, banks face taxation, flotation costs of securities, and default costs and maximize shareholder value …

I develop a dynamic capital structure model to examine how the nature of risk affects firm's debt policy. In the model …, firm's fundamental risk, captured by its cash flow process, consists of transitory and persistent parts with markedly … different dynamics. The model explains the observed dispersion in the risk-leverage relationship. Firms with similar total …

Most regulators grant contingent convertible bonds (CoCos) the status of equity. Theory, however, suggests that CoCos …

We study how contingent capital affects banks' risk choices. When triggered in highly levered states, going …-concern conversion reduces risk-taking incentives, unlike conversion at default by traditional bail-inable debt. Interestingly …, contingent capital (CoCo) may be less risky than bail-inable debt as its lower priority is compensated by a lower induced risk …