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Endogenous Debt Contracts With Undistorted Incentives

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Author Info
Povel, Paul () (Sonderforschungsbereich 504)
Raith, Michael () (Graduate School of Business, University of Chicago)

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Abstract

We study a firm's incentives in an environment in which optimal contracts resemble debt. After agreeing to the terms of a financial contract, but before its earnings are realised, a firm has to take a decision which affects its cash flows. This decision cannot be observed by the lender; this is meant to capture risk-shifting possibilities fr

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Publisher Info
Paper provided by Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim in its series Sonderforschungsbereich 504 Publications with number 99-61.

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Length: 40 pages
Date of creation: 15 Mar 1999
Date of revision:
Handle: RePEc:xrs:sfbmaa:99-61

Note: Financial Support from the Deutsche Forschungsgemeinschaft, SFB 504, at the University of Mannheim, is gratefully acknowledged.
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