This paper offers evidence on the design of subprime mortgages as bridge-financing products. We show that the viability of subprime mortgages was uniquely predicated on the appreciation of house prices over short-horizons. High rates of early prepayments on subprime mortgages are suggestive of...

This paper investigates the effect of financing frictions due to source of capital, on firm investment and value. Using instrumental variables approach that controls for endogeneity arising from demand-side factors, we find that firms with access to public debt markets have 11% higher investment...

We consider borrowers with the opportunity to raise funds from a competitive banking sector that shares information, and from an alternative hidden lender. The presence of the hidden lender restricts the contracts that can be obtained from the banking sector. In equilibrium some borrowers obtain...

We consider borrowers with the opportunity to raise funds from a competitive banking sector that shares information about borrowers, and an alternative hidden lender. We highlight that the presence of the hidden lender restricts the contracts that can be obtained from the banking sector and that...

We propose a parsimonious model with adverse selection where delinquency, renegotiation, and bankruptcy all occur in equilibrium as a result of a simple screening mechanism. A borrower has private information about her cost of bankruptcy, and a lender may use random contracts to screen different...