We analyze one frequently used clause in public bonds called covenant defeasance. Covenant defeasance allows the bond issuer to remove all of the bond's covenants by placing the remaining outstanding payments with a trustee in an escrow account to be paid out on schedule. Bond covenants are...

This paper presents a model of the collective decision making of corporate boards. Each director collects costly private information and votes to maximize his welfare given his compensation. We derive optimal contracts that induce first-best outcomes for shareholders despite directors' incentive...

We model the interaction of product market competition and firms' financing decision when firms face capital market imperfections and consumers face switching costs. In our model, consumers anticipate that capital market frictions may drive their supplier out of business and account for welfare...

This paper investigates the governance structure choices of firms when there is competition between legal systems. We study the impact of the allocation of control over choice of governance and reincorporation on firms' technologies and technological specialization of countries in the context of...

process, incorporating moral hazard and asymmetric information problems. The structure of the model, involving managerial effort, staged investment, and later-stage syndication, replicates what we know empirically of venture-capital financing. An entrepreneur raises funding for a positive NPV...

This paper develops a model to study how entrepreneurs and venture-capital investors deal with moral hazard, effort provision, asymmetric information and hold-up problems. We explore several financing scenarios, including first-best, monopolistic, syndicated and fully competitive financing. We...

This paper investigates the design of the control rights and the maturity of securities when management has the ability to divert or manipulate the cash flows, and when it is prohibitively costly for a third party, such as a court, to verify or prove any managerial wrongdoing. By endogenizing...

This paper investigates the design of long-term debt contracts when management has the ability to divert or manipulate the cash flows, and when it is prohibitively costly for a third party, such as a court, to verify or prove any managerial wrongdoing. We show that debt with maturity longer than...

This article investigates the distribution of equity ownership between entrenched management and dispersed outsiders when management has the ability to manipulate the cash flows and when it is costly for equityholders to prove managerial wrongdoing in court. Management chooses the distribution...

This paper analyzes the dynamics of the interaction between internal control and outside equityholders and the timing of corporate control contests and management buyouts. The model provides a particularly useful framework to investigate corporate decisions with a dynamic perspective. There is a...