It is customary to focus on the network of interdependencies between firms to understand how and whether a shock to one firm will propagate to others. This paper argues that agency conflicts at the firm-level and not just the network structure, play a crucial role in amplifying or muting the...

We analyse the effect of mean-reverting cash flows on the costs of shareholder-bondholder conflicts arising from partially debt-financed investments. In a partial equilibrium setting we find that such agency costs are significantly lower under mean-reverting (MR) dynamics, when compared to the...

We exploit plausibly exogenous variation in the tax consequences of renegotiating U.S. syndicated loans to isolate the effect of renegotiation costs on initial contract terms. TD9599 materially reduced the tax burden of renegotiating U.S. syndicated loans, while leaving the taxation of...

Firms' inability to commit to future funding choices has profound consequences for capital structure dynamics. With debt in place, shareholders pervasively resist leverage reductions no matter how much such reductions may enhance firm value. Shareholders would instead choose to increase leverage...

This paper introduces a dataset on forms of finance used in 12,363 Canadian and US venture capital and private equity financings of Canadian entrepreneurial firms from 1991 to 2003. The data comprise different types of venture capital institutions, including corporate, limited partnership,...

Debt financing gives rise to conflicts of interest between creditors and stockholders that are better controlled with private loans than publicly traded bonds. However, public debt has greater liquidity and diversifiability. We propose an institutional innovation ? a "supertrustee" - that...

This paper addresses two issues encountered in the empirical financial distress literature: a-theoretical treatment of leverage and product-market competition as predictors of financial distress hazard; and lack of attention to frailty as a potential source of bias in reported estimates. We...

During times of distress, companies are compelled to reassess operational policies and reengineer strategic formulations to discern value maximising uses for limited resources. The executive’s agility to react to financial distress determines the probability of bankruptcy. Proper governance...

We study a capital market in which multiple lenders sequentially attempt at financing a single borrower under moral hazard. We show that restricting lenders to post take-it-or-leave-it offers involves a severe loss of generality: none of the equilibrium outcomes arising in this scenario survives...

A liquidity-constrained asset owner designs an asset-backed security to raise funds from an informed liquidity supplier. Information insensitive securities reduce the liquidity supplier's informational rents. The issuer optimally screens the liquidity supplier's private information by offering a...