This paper considers a model of firms' financing based on the existence of a moral hazard problem in the choice of investment projects by a heterogeneous population of entrepreneurs. Two alternative ways of funding these projects, called unmonitored (or market) and monitored (or bank) lending,...

This paper explores how motivating an incumbent CEO to make investments that improve the effectiveness of the firm's organization interacts with the replacement policy of the board of directors. We characterize the optimal compensation package (including severance pay) under governance...

We claim that the stock market encourages business creation, innovation, and growth by allowing the recycling of "informed capital". Due to incentive and information problems, new start-ups face high flotation costs. Sustaining a tight relationship with a monitor allows them to postpone their...

This paper provides a theory of venture capital financing based on the complementarity between the financing and advising roles of venture capitalists. We examine the interaction between the staging of investment, that characterizes young firms with a high growth potential, and the double-sided...

We explore the business-cycle implications of agency problems between firms and financiers. We show how these problems create liquidity shortages that can lead to corporate bankruptcy, and may generate aggregate, endogenous cycles in an economy that otherwise would have had a unique, stationary...

This paper considers why a manager would choose to submit himself to the discipline of bank monitoring. This issue is analyzed within the context of a model where the manager enjoys private benefits, which can be restricted by the monitor, and is optimally compensated by shareholders. Within...