We analyze corporate financial policies in leveraged buyouts (LBOs) in the presence of default risk. Our model captures the LBO-specific stepwise debt reduction, either with predetermined or cash-flow dependent (cash sweep) principal payments, and thus allows for dynamic redemption. These...

The internal rate of return (IRR) is still a widespread criterion for investment decisions, although many pitfalls are well known. This paper provides evidence for another, more fundamental, dark side of IRR: Based on a dynamic model of optimal capital structure with endogenous bankruptcy...

Venture capital often involves complex equity contracts, which affect the allocation of cash flows among shareholdings at an exit liquidation. To facilitate economic impact analysis, we structure exit relevant preferential rights by their economic impact in a two-dimensional framework. Based...