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...

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 article develops a theory of mergers and divestitures. The motivation stems from an inability to finance marginally profitable projects as stand-alones due to agencyproblems. A conglomerate merger is a technology that allows these projects to survive a period of distress. If profitability...

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...