This study examines the determinants of capital adequacy and voluntary capital buffers among microfinance institutions (MFIs). We apply the two-stage least squares (2SLS) with instrumental variables to account for endogeneity. Using quarterly panel data of 439 MFIs in Ghana covering the period...

We incorporate long-term defaultable corporate bonds and credit risk in a dynamic stochastic general equilibrium business cycle model. Credit risk amplifies aggregate technology shocks. The debt-capital ratio is a new state variable and its endogenous movements provide a propagation mechanism....

We incorporate long-term defaultable corporate bonds and credit risk in a dynamic stochastic general equilibrium business cycle model. Credit risk amplifies aggregate technology shocks. The debt-capital ratio is a new state variable and its endogenous movements provide a propagation mechanism....

A standard assumption of structural models of default is that firms' assets evolve exogenously. In this paper, we examine the importance of accounting for investment options in models of credit risk. In the presence of financing and investment frictions, fi rm-level variables that proxy for...

We investigate how idiosyncratic lender shocks impact corporate investment. Lenders with recent default experience write stricter loan contracts, leading to a reduction in real investment for borrowing firms. The decline in investment is not attributable to loan riskiness, borrower's agency...

Lack of shareholders' commitment about debt and investment policies increases the cost of debt by a quantity that we refer to as the agency (credit) spread. The agency spread increases with the number of periods for which debt holders are exposed to policies that decrease the value of debt: from...

I construct an infinite-horizon dynamic stochastic general equilibrium model with a collateral constraint and actual default in equilibrium. Entrepreneurs borrow from households through non-recourse debt contracts backed by capital goods. By taking into account the non-linear payoffs of the...

Czech credit unions have been yet criticized by both academics and regulatory representatives for its business based on moral hazard and excessive risk taking. This paper empirically assesses financial performance of Czech credit unions in relation with other European cooperative banks in terms...

We exploit the cross-state, cross-time variation in bank tangible capital ratios-brought about by bank branch deregulation on a state-by-state basis-to identify the effects of bank capital pressures on employment and firm dynamics during two waves of changes in bank capital regulation. We show...

The risk of default that business firms face is very significant and differs widely across countries. This paper explores the links between countries' business conditions and international trade embedment and the default risk at the country level from a theoretical point of view. Our main...