This paper examines the impact of capital structure on the optimality of contingent financial contracts. The role of financial relationships is not only to provide funds but also to offer insurance to a risk adverse entrepreneur through contingent financial transfers. Since such financial...

This study deals with the evolution of the financing of large Canadian companies from 1960 to 1994. Part I shows that there hass been no significant increase in total corporate debt in Canada, as there has been in the U.S. Total indebtness increased between 1960 and 1982 and then declined; by...

This study presents empirical evidence on the influence of sponsoring companies on the funding and portfolio allocation of pension funds, an issue on which most extant literature is theoretical. We use a unique microdataset of 550 Dutch defined benefit company pension funds and 100 sponsoring...

We base a contracting theory for a start-up firm on an agency model with observable but nonverifiable effort, and renegotiable contracts. Two essential restrictions on simple contracts are imposed: the entrepreneur must be given limited liability, and the investor’s earnings must not decrease...

This empirical study revisits the determinants of firms' capital structures. The main focus thereby is onthe 'market timing theory', according to which the current level of the capital structure is the cumulative outcome of past attempts to `time the market', i.e. issuing shares when equity is...

We study the incentive issues associated with self-enforcing stochastic monitoring in a model of investment and production. The efficient contract features a debt-like payment with a threshold in terms of the reported output in which all of the reported output is taken up to the threshold if...

The aim of this paper is to study the impact of the bankruptcy law on financing, investment, default and liquidation decisions of firms. We build a model in which the firm has the opportunity to get into debt to finance an investment whose return is stochastic. Shareholdersand bondholders...

Why are aggregate equity payouts and debt issued positively correlated over the business cycle in U.S. data? Standard real business cycle (RBC) models have few predictions about capital structure, because they assume that financial markets are frictionless. On the other hand, the tradeoff theory...

After 1985, a large number of LBO project were not able to meet their debt. Among these cases, the Federated Department Stores LBO repurchased by Campeau and the Gateway LBO repurchased by Macy's. But, the conventional view of LBO transactions is that they are designed to improve the efficiency...