Smith, Stephen D.; Wall, Larry D. - In: Journal of Financial Stability 6 (2010) 2, pp. 55-63
This paper provides a theory of debt and hedging based on human capital. We distinguish human capital from physical capital in two ways: (1) human capital is inalienable and can exercise a one-sided option to leave the firm and (2) human capital is not perfectly replaceable. We show that a firm...
