We examine whether performance-sensitive debt (PSD) is used to reduce hold-up problems in long-term lending relationships. We find that the use of PSD is more common in the presence of a long-term lending relationship and if the borrower has fewer financing alternatives available. In syndicated...

Performance-sensitive debt (PSD) contracts link a loan's interest rate to a measure of the borrower's credit relevant performance, e.g. if the borrower's debt to cash ow ratio deteriorates, the interest rate increases according to a predetermined schedule. We derive and empirically test a...

I develop a dynamic capital structure model in which shareholders determine a firm's leverage ratio, debt maturity, and default strategy. In my model, the firm's debt matures all at once. Therefore, after repaying the principal shareholders own all the firm's cash flows and can pick a new...

Systemically important banks are subject to at least two departures from the neutrality of debt versus equity financing: the tax deductibility of interest payments and implicit funding subsidies. This paper fills a gap in the literature by comparing their mechanism and interaction within a...

The objective of this paper is to investigate the process of company´s debt accumulation in different European countries throughout the last decade. As a preliminary step to the empirical study, a new theoretical framework is proposed relative to capital structure, where the decision of going...

The maintenance of financial liquidity, stability, profitability and the value and investment capabilities of a company as well as the avoidance of financial bottlenecks are the most vital objectives of people in charge of ac ompany, especially in times of crisis. This paper presents the...

Venture debt, or loans to rapid-growth start-ups, is a puzzle. How are start-ups with no track records, positive cash flows, tangible collateral, or personal guarantees from entrepreneurs able to attract billions of dollars in loans each year? And why do start-ups take on debt rather than rely...

In this paper we build a theoretical model of a firm repurchasing its corporate debt. We find that firm creditors as a group sell debt to the firm only at face value. However, because of the cross-creditor externalities buying back debt is cheaper and easier when there are many creditors, e.g.,...

Legal rules play a powerful but understudied role in security design. This article presents two new theoretical results about the design of debt contracts. The results derive from the premise that firms must avoid legal insolvency when issuing new debt because insolvency at issuance would...