We find strong evidence in the OECD country panel data to support the Knightian view that non-diversifiable economic risks shape the equilibrium entrepreneurship in an occupational choice model. Differential social insurance of entrepreneurial and labor risk is found to be statistically...

In the nineties, average firm size decreased, organisations decentralized, and workers preferences shifted from large to small firms. Our model identifies the economic forces behind this trend. Small firms with little capital at risk are subject to risk-shifting. They realize more of their...

This paper describes a parsimonious macro-finance model where contracts are the mechanism by which differentially risk averse bondholders and stockholders resolve a conflict of interest problem and confront the risks associated with future investment and financing decisions of a representative...

In this paper I develop a model of a debt and equity financed representative firm whose production/investment decisions and financing decisions characterize business cycles. The conflict of interest problem between the differentially risk averse debt and equity investors is resolved with an...

This paper describes a business cycle model where financial contracting with interrelated covenants is the mechanism by which bondholders and stockholders confront the risks associated with future production-investment decisions and financing decisions of the firm and in the process resolves a...

This paper describes an equilibrium macro finance model where contracts are the mechanism by which differentially risk averse bondholders and stockholders resolve a conflict of interest problem and confront the risks associated with future operating decisions and financing decisions of a...

In this paper I develop a model that focuses attention on the financial side of business cycles. Investors in this model separate into bondholders and stockholders based on differences in risk aversion that creates a conflict of interest problem for the future management of the representative...

We study the relationship between the acquisition of partial equity ownership and interlocking directorates among rival companies. Partial equity ownership between rivals in the product market is convenient, even in the case of passive participation, since, internalizing competition, raises the...

This paper describes the balance sheet adjustments of debt and equity financed firms over the business cycle. A model is developed that describes a representative firm with a stochastic diminishing returns technology and a set of financial contracts that resolves a conflict of interest problem...

Bank specialization leads to expertise, including knowledge on zombie borrowers and the negative impact they exert on healthy borrowers. This induces specialized banks to reduce zombie lending. The reduction in zombie lending is larger when the scope and opportunity cost of negative spillovers...