Journal ArticleAmerican Economic Review · February 1, 2023
We characterize efficiency in an equilibrium model of investment and capital reallocation with heterogeneous firms facing collateral constraints. The model features two types of pecuniary externalities: collateral externalities, because the resale price of ...
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Journal ArticleJournal of Finance · April 1, 2020
We study risk management in financial institutions using data on hedging of interest rate and foreign exchange risk. We find strong evidence that institutions with higher net worth hedge more, controlling for risk exposures, across institutions and within ...
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Journal ArticleAmerican Economic Review · February 1, 2019
This paper studies how the durability of assets affects financing. We show that more durable assets require larger down payments making them harder to finance, because durability affects the price of assets and hence the overall financing need more than th ...
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Scholarly Edition · January 1, 2019
We propose a dynamic theory of financial intermediaries that are better able to collateralize claims than households, that is, have a collateralization advantage. Intermediaries require capital as they have to finance the additional amount that they can le ...
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Journal ArticleJournal of Financial Economics · February 1, 2014
Both financing and risk management involve promises to pay that need to be collateralized, resulting in a financing versus risk management trade-off. We study this trade-off in a dynamic model of commodity price risk management and show that risk managemen ...
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Journal ArticleJournal of Financial Economics · August 1, 2013
We develop a dynamic model of investment, capital structure, leasing, and risk management based on firms' need to collateralize promises to pay with tangible assets. Both financing and risk management involve promises to pay subject to collateral constrain ...
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Journal ArticleJournal of Finance · December 1, 2010
Collateral constraints imply that financing and risk management are fundamentally linked. The opportunity cost of engaging in risk management and conserving debt capacity to hedge future financing needs is forgone current investment, and is higher for more ...
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Journal ArticleReview of Financial Studies · April 1, 2009
This paper studies the financing role of leasing and secured lending.We argue that the benefit of leasing is that repossession of a leased asset is easier than foreclosure on the collateral of a secured loan, which implies that leasing has higher debt capa ...
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Journal ArticleJournal of the European Economic Association · March 1, 2008
Incentive compensation induces correlation between the portfolio of managers and the cash flow of the firms they manage. This correlation exposes managers to risk and hence gives them an incentive to hedge against the poor performance of their firms. We st ...
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Scholarly Edition · 2008
We study whether borrowers optimally conserve debt capacity to take advantage of investment opportunities due to temporarily low asset prices, when financing is subject to collateral constraints due to limited enforcement. We find that borrowers may exhaus ...
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Journal ArticleJournal of Financial Economics · January 1, 2008
We argue that when managers have private information about the productivity of assets under their control and receive private benefits, substantial bonuses are required to induce less productive managers to declare that capital should be reallocated. The n ...
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Journal ArticleJournal of Monetary Economics · November 1, 2007
Used capital is cheap up front but requires higher maintenance payments later on. We argue that the timing of these investment cash outflows makes used capital attractive to financially constrained firms, since it is cheap when evaluated using their discou ...
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Journal ArticleJournal of Public Economics · May 1, 2006
We study the role of anonymous markets in which trades cannot be monitored by the government. We adopt a Mirrlees approach to analyze economies in which agents have private information and a benevolent government controls optimal redistributive tax policy. ...
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Journal ArticleJournal of Monetary Economics · April 1, 2006
This paper shows that the amount of capital reallocation between firms is procyclical. In contrast, the benefits to capital reallocation appear countercyclical. We measure the amount of reallocation using data on flows of capital across firms and the benef ...
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Journal ArticleEconomic Theory · February 1, 2006
The paper studies the institution of bankruptcy when exclusive contracts cannot be enforced ex ante, e.g., a bank cannot monitor whether the borrower enters into contracts with other creditors. The institution of bankruptcy enables the bank to enforce its ...
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Journal ArticleJournal of Economic Theory · June 1, 2005
This paper studies how default varies with aggregate income. We analyze a model in which optimal contracts enable risk sharing of privately observed, idiosyncratic income by allowing for default. Default provisions allow agents with low idiosyncratic incom ...
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Journal Article · November 2004
Incentive compensation induces correlation between the portfolio of managers and the cash flow of the firms they manage. This correlation exposes managers to risk and hence gives them an incentive to hedge against the poor performance of their firms. We st ...
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Journal ArticleJournal of Monetary Economics · April 1, 2004
This paper analyzes a model in which the risk associated with entrepreneurial activity implies that the amount of such activity is procyclical and results in amplification and intertemporal propagation of productivity shocks. In the model risk averse agent ...
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Scholarly Edition · 2004
This paper studies the provision of incentives to reallocate capital when managers are reluctant to relinquish control and have private information about the productivity of assets under their control. We show that when managers get private benefits from ...
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Scholarly Edition
This paper analyzes a model in which incentive constrained
contracting implies both amplification and intertemporal
propagation of technology shocks. In the model risk averse agents
choose between a riskless technology and a risky technology (`the
ent ...
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