Net-worth covenants, as introduced by Black and Cox (1976), provide the firm’s bondholders with the right to force reorganization or liquidation if the value of the firm falls below a certain threshold. In the event of default, however, many bankruptcy codes stipulate an automatic stay of...

This paper examines how the investment of financially constrained firms varies with their level of internal funds. We develop a theoretical model of optimal investment under financial constraints. Our model endogenizes the costs of external funds and allows for negative levels of internal funds....

This article values equity and corporate debt by taking into account the fact that in practice the default point differs from the liquidation point and that it might be in the creditors' interest to delay liquidation. The article develops a continuous time asset pricing model of debt...

In this paper the problem of valuing corporate debt with possibility of default is considered. It is assumed that the volatility of the value of a firm's assets evolves according to an Ornstein-Uhlenbeck process and default occurs only if the value of corporate assets falls below an exogenously...

This paper links banking with asset prices in a monetary macroeconomic model. The main innovation is to consider how falling asset prices affect the banking system through wide-spread borrower default, while deriving explicit solutions and balance sheet effects even far from the steady state. We...

Este trabajo pretende, utilizando una versión modificada del modelo de crecimiento continuo de Higgins para la valuación de activos de capital, obtener evidencia en cuanto a la relevancia de la información contable en la valuación del valor de mercado del patrimonio en la industria de...

Listing of stocks on the stock exchange offers business firms several advantages such as diversification, liquidity, establishing a value for the firm etc. The present paper analyses stocks of six commercial banks (viz., Dubai Commercial Bank, Emirates Bank International, National Bank of Dubai,...

This paper seeks empirically to identify the determinants of the very small firms’ financial leverage. This is important because both these enterprises have been under-researched and research in the area has been troubled by samples biased towards very large enterprises. Results support...

We present a unified analytical theory of production and capital structure of firms. It is extended from an analytical theory of production, whose main result is an analytical formula of variable cost of production as a function of fixed cost and uncertainty. Problems on capital structure can be...

This study investigates the firm financing patterns in India and the role of corporate governance mechanisms. We use firm-level time series data of nearly 2000 listed companies from 1994 through 2000, to analyze the firm’s corporate financing behavior in connection with its corporate...