We model the expansion decision of a levered firm. Straight debt distorts both timing and scaling: the firm invests … less and later than its all-equity financed counterpart. The inclusion of performance sensitivity in the debt contract …-off theory of capital structure. As a result, our model rationalizes the widespread use of performance sensitive debt (PSD …

We study rollover risk and collateral value in a dynamic asset pricing model with endogenous debt financing by … news. We demonstrate the optimality of the maximum riskless short-term debt financing for optimistic borrowers even in the …