We examine renegotiation in a double moral hazard model when both the principal and the agent are allowed to make a renegotiation offer to a self-interested arbitrator at the renegotiation stage even though the principal proposes an initial contract. Under a belief restriction, any...

We develop a main bank model where the main bank decides whether or not to raise additional funds from the capital market to continue to invest in a borrowing firm when nonmain banks withdraw funds. We show that the threat of withdrawal of nonmain banks is more likely to force the main bank to...

We consider the role of the nonrecourse financing of securitization by a financial institution (FI). Our model suggests that even though the FI has the opportunity to provide liquidity support afterward, it is optimal for the FI to use the nonrecourse financing of securitization initially,...

This paper explores a continuous-time agency model with double moral hazard. Using a venture capitalist—entrepreneur relationship where a manager provides unobservable effort while a venture capitalist (VC) both supplies unobservable effort and chooses the optimal timing of the initial public...

In this paper, we explore a dynamic theory of investment and costly managerial turnover given agency conflicts between the firm manager and investors. We incorporate the possibility of the successive replacement of managers until the firm is finally liquidated, and develop a continuous-time...

Given an owner's noncommitment timing strategy and a manager's hidden action, we consider how the optimal compensation contract for the manager is designed and how the corresponding timing decisions to launch the project and replace the manager are determined. Using a real options approach, we...

This paper develops a model that considers the entrepreneur's moral hazard in the choice of project, the bank's moral hazard in the choice of bank loan contracting and refinancing, and the prudential regulation of the bank. The main findings are as follows: (i)Increasing capital requirements...