We develop a dynamic model of debt contracts with adverse selection and belief updates. In the model, entrepreneurs borrow investment goods from lenders to run businesses whose returns depend on entrepreneurial productivity and common productivity. Entrepreneurial productivity is the...

We explore empirically how the time-varying allocation of credit across firms with heterogeneous credit quality matters for financial stability outcomes. Using firm-level data for 55 countries over 1991-2016, we show that the riskiness of credit allocation, captured by Greenwood and Hanson...

This paper explores how the structure of EU non-financial corporation's in terms of size and activity specialisation can influence their financing mix and, particularly, the use of capital markets as a source of funding.Significant differences in the structure and size of firms are observed...

Privately-produced safe debt is designed so that there is no adverse selection in trade. But in some macro states, here the onset of the pandemic, it becomes profitable for some agents to produce private information, and then agents face adverse selection when they trade the debt (i.e., it...

This paper studies the welfare properties of competitive equilibria in an economy with incomplete markets subject to idiosyncratic and aggregate shocks. We focus on the role of securitization, whereby borrowers can reduce idiosyncratic asset risk, which enables increased leverage and investment....

We develop a two-layer asset pricing framework to analyze the fragility of the corporate bond market. In the model, households allocate wealth to institutional investors such as mutual funds and insurance companies. Institutional investors then allocate funds to specific assets. Equilibrium...

The difference between corporate bond yields at issuance and in secondary markets, the "issuance premium", spikes in bad times, increasing firms' costs of capital. Leveraging new bond-level data, I estimate a model of primary markets with imperfectly elastic investors and endogenous firms'...

The modern financial system features complicated financial intermediation chains, with each layer performing a certain degree of credit/maturity transformation. We develop a dynamic model in which an entrepreneur borrows from overlapping-generation households via layers of funds, forming a...

Limited partners (LPs) of private equity funds commit to invest with extreme levels of illiquidity and significant uncertainty regarding the timing of capital flows. Secondary markets have emerged which alleviate some of the associated cost. This paper develops a subjective valuation model...

The recent vote by Britain to quit European Union (EU) and the political pressures in some member countries to exit EU necessitates a critical evaluation of the long-run economic benefits of economic integration or union to member countries. Consequently, this paper examines recent empirical...