This paper studies pension fund design in the context of investment in the debt and equity of a firm. We employ a general equilibrium framework to demonstrate that: (i) the asset location ‘puzzle’ is purely a partial equilibrium phenomenon, conceived in a risk neutral setting, that...

This paper studies the optimal financing (capital structure) of entrepreneurial activity in the context of "risk-aversion" by incorporating the deadweight costs of bankruptcy and taxes. Unlike the extreme debt ratio (corner solution) predicted by scholars using linear models, this paper provides...