This paper analyzes debt-equity choice for financing a two-stage investment when a firm’s insiders have private information about the firm’s expected earnings. When private information is one-dimensional (for example when short-term earnings are common knowledge while long-term earnings are...

Becker and Fuest (forthcoming) provides a new explanation for the important and puzzling link between limited liability and corporate taxation. The authors argue that a corporate tax on all entrepreneurs with limited liability is optimal when entrepreneurs can offset potential losses and when...

Becker and Fuest (forthcoming) provides a new explanation for the important and puzzling link between limited liability and corporate taxation. The authors argue that a corporate tax on all entrepreneurs with limited liability is optimal when entrepreneurs can offset potential losses and when...

We consider a model where wealth-constrained entrepreneurs have private information about the qualities of available investment projects. We show that some "high risk-high return" projects will receive external financing even if they are not socially profitable. Some "low risk-low return"...

Crowdfunding has mostly been used to finance very unique projects. Recently, however, companies have begun using it to finance more traditional products where they compete against other sellers of similar products. Major crowdfunding platforms, Kickstarter and Indiegogo, as well as Amazon have...

We build a model of debt for firms with investment projects, for which flexibility and free cash flow problems are important issues. We focus on the factors that lead the firm to select the zero-debt policy. Our model provides an explanation of the so-called "zero-leverage puzzle". It also helps...

This paper considers a financing problem for an innovative firm that is launching a web-based platform. The entrepreneur, on one hand, faces a large degree of demand uncertainty on his product and on the other hand has to deal with incentive problems of professional blockchain participants who...