A Theory of Debt Based on the Inalienability of Human Capital
AbstractConsider an entrepreneur who needs to raise funds from an investor but cannot commit not to withdraw his human capital from the project. The possibility of a default or quit puts an upper bound on the total future indebtedness from the entrepreneur to the investor at any date. The authors characterize the optimal repayment path and show how it is affected both by the maturity structure of the project return stream and by the durability and specificity of project assets. The authors' results are consistent with the conventional wisdom about what determines the maturity structure of long-term debt contracts. Copyright 1994, the President and Fellows of Harvard College and the Massachusetts Institute of Technology.
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Bibliographic InfoArticle provided by MIT Press in its journal Quarterly Journal of Economics.
Volume (Year): 109 (1994)
Issue (Month): 4 (November)
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Web page: http://mitpress.mit.edu/journals/
Other versions of this item:
- Oliver Hart & John Moore, 1995. "A Theory of Debt Based on the Inalienability of Human Capital," NBER Working Papers 3906, National Bureau of Economic Research, Inc.
- Oliver Hart & John Moore, 1991. "A Theory of Debt Based on the Inalienability of Human Capital," STICERD - Theoretical Economics Paper Series /1991/233, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
- Hart, O. & Moore, J., 1991. "A Theory of Debt Based on the Inalienability of Human Capital," Working papers 592, Massachusetts Institute of Technology (MIT), Department of Economics.
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
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