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Capital Structure under Imperfect Enforcement

Author

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  • Hvide, Hans K
  • Leite, Tore

Abstract

Building on a costly state verification framework, we propose a theory of capital structure with imperfect enforcement. In addition to being consistent with stylized facts on the choice of capital structure, it accommodates a range of empirical regularities on the repayment behaviour, such as strategic defaults of debt obligations, costly bankruptcy, investor intervention, and violations of absolute priority rules.

Suggested Citation

  • Hvide, Hans K & Leite, Tore, 2004. "Capital Structure under Imperfect Enforcement," CEPR Discussion Papers 4757, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:4757
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    Cited by:

    1. HansK. Hvide, 2009. "The Quality of Entrepreneurs," Economic Journal, Royal Economic Society, vol. 119(539), pages 1010-1035, July.

    More about this item

    Keywords

    cash diversion; costly state verification; financial contracts; outside equity;

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