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Zhengqing Gui(桂正卿),Ernst-Ludwigvon Thadden,Xiaojian Zhao: Incentive-compatibility, Limited Liability and Costly Liquidation in Financial Contracting
时间:2019-12-09    点击数:

Abstract: 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.

Keywords: Financial contracting; Incentive-compatibility; Limited liability; Indivisible collateral; Costly liquidation.


   本文于201911月在线发表于Games and Economic Behavior上,该期刊为经济与管理学院A类奖励期刊,作者按姓氏字母排序。