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Incentive-compatibility, limited liability and costly liquidation in financial contracting
Gui, Zhengqing
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Thadden, Ernst-Ludwig von
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Zhao, Xiaojian
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DOI:
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https://doi.org/10.2139/ssrn.2824425
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URL:
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https://ssrn.com/abstract=2824425
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Dokumenttyp:
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Arbeitspapier
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Erscheinungsjahr:
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2016
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Titel einer Zeitschrift oder einer Reihe:
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SSRN Working Paper Series
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Ort der Veröffentlichung:
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Rochester, NY
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Auflage:
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Rev. 2019
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Sprache der Veröffentlichung:
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Englisch
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Einrichtung:
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Fakultät für Rechtswissenschaft und Volkswirtschaftslehre > Microeconomics and Finance (von Thadden (2004-)
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Fachgebiet:
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330 Wirtschaft
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Abstract:
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This paper studies a financial contracting problem where a firm privately observes its cash flow and faces a limited liability constraint. The firm's collateral is piecemeal divisible and can only be liquidated continuously by resorting to the service of a costly third party, typically associated with bankruptcy. In this situation, multi-class collateralized debt is optimal, in which the firm makes several debt-like promises with a seniority structure. The decision over continuous and piecemeal liquidation depends on both the cost of introducing the third party and the firm's funding need. Allowing the firm to refinance ex-post through surreptitious liquidation may reduce the firm's ex-ante payoff, consistent with covenants in debt contracts prohibiting the sale of assets.
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 | Dieser Eintrag ist Teil der Universitätsbibliographie. |
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