We construct a synthesized model to study credit rationing by loan size. In our model, the borrower faces a trade-off between raising debt and exerting costly effort to undertake an investment project. In the absence of agency costs, increasing the loan size at the equilibrium interest rate...

We use a variant of the Hotelling (1929) model to illustrate that, when a firm faces hard payment constraint(s), financially strong rivals may adopt predatory strategies to drive the firm out of the product market and hence to obtain extra profit from enhanced market power later on. Predation is...

We construct a unified framework to study credit rationing by the loan size. Due to default risk, the loan offer curve is positive-sloping. At the equilibrium interest rate, increasing the loan size reduces the average cost of the loan, so the borrower always demands a larger loan than that the...

This paper examines how the information quality of ratings from an issuer-paid rating agency (Standard and Poor's) responds to the entry of an investor-paid rating agency, the Egan-Jones Rating Company (EJR). By comparing S&P's ratings quality before and after EJR initiates coverage of each...