This paper considers the effects of strategic substitutabilities on performance and incentives in venture capital financing. The analysis points to a subtle link between two pivotal roles of venture capitalists: (i) monitoring ventures and setting performance incentives, and (ii) coordinating...

This paper develops a financial contracting setting to explore the effects of strategic substitutabilities in venture capital financing. Strategic substitutabilities between a VC’s portfolio firms may induce a VC to provide soft entrepreneurial incentive schemes in order to limit...

We develop a model in order to explore how a bank's equity stake in a competitor of a borrower affects the financing relationship with the borrower and product market outcomes. The bank's affiliation with the competitor can give rise to anti- or pro-competitive effects. Large equity stakes can...

This paper studies the interplay between corporate leverage and product pricing when liquidation is costly for customers. I develop a model which illustrates that highly leveraged firms can enter a vicious circle in which financial distress and sales drops are re--enforcing. There is a "good''...

We develop a model in order to explore how a bank’s equity stake in a competitor of a borrower affects the financing relationship with the borrower and product market outcomes. The bank’s affiliation with the competitor can give rise to antior pro–competitive effects. Large equity stakes...

This paper develops a contracting framework in order to explore the effects of credit derivatives on banks’ incentives to monitor loans, their incentives to intervene, and, ultimately, borrowers’ incentives to perform. We show that (i) credit derivatives with short term maturity strengthen...

We explore the joint determination of product differentiation strategy and corporate leverage in a setting where (i) product differentiation is valued by customers; (ii) debt is necessary to discipline managers; and (iii) liquidation is costly for customers, in particular, when products are...