Debt financing plays an important role in the funding of innovative firms, and patents have been increasingly used as collateral. We examine financing of innovative firms when future innovations are not verifiable and hence patenting, which creates a verifiable asset, cannot be contracted upon....

In many countries, the legal system or social norms ensure that firms are stakeholder oriented. We analyze the advantages and disadvantages of stakeholder-oriented firms that are concerned with employees and suppliers compared to shareholder-oriented firms in a model of imperfect competition....

Proprietary information generated through the process of lending can impact the structure of the banking industry. With more competing banks, borrower-specific information becomes more disperse, as each bank becomes informed about a smaller pool of borrowers. This reduces banks' screening...

The superior nature of the information exchanged over the course of a lending relationship generates a bank-client specificity to the extent that such information cannot be communicated credibly to outsiders. Consequently, banks obtain higher profits from more captured borrowers than from...

We analyze the nature of financial contracting when an entrepreneur can choose the specificity of investments and financial contracts are incomplete. Investing in project specific assets increases productivity but decreases liquidation value. This creates a strategic incentive to specialize...

When do sellers benefit from the presence of a strong buyer? In a second-price auction with independent private values and entry costs for buyers, we allow for one buyer to be stochastically "strong." We show that when buyers make positive net profits, seller revenue is higher with a stronger...

Superior information exchanged over the course of lending relationships generates bank-client specificities to the extent that such information cannot be communicated credibly to outsiders. Consequently, banks obtain higher profits from more captured borrowers than from borrowers with financing...

We explore the behavior of supervisors when a centralized agency has full power over all decisions regarding banks, but relies on local supervisors to collect the information necessary to act. This institutional design entails a principal-agent problem between the central and local supervisors...