Blackburn, Keith; Bose, Niloy; Capasso, Salvatore - In: Review of Development Economics 9 (2005) 2, pp. 135-149
In an overlapping generations economy, households (lenders) fund risky investment projects of firms (borrowers) by drawing up loan contracts on the basis of asymmetric information. An optimal contract entails either the issue of only debt or the issue of both debt and equity according to whether...