Capital Structure with Multiple Investors
We study the problem of financial contracting between a firm and outside investors when the firm cannot commit to future payouts, but assets can be contracted upon. By analyzing the renegotiation between firm and investors in default, we show that a capital structure with multiple investors specializing in short-term and long-term claims is superior to a structure with only one type of claim. By separating their claims over time and by giving the holder of short-term claims the right to liquidate assets when debt repayments are not met, investors can harden the incentives for the entrepreneur to renegotiate the contract ex post. Depending on the parameters, the optimal capital structure also differentiates between state-independent and state-dependent long- term claims, which can be interpreted as long-term debt and equity. We derive implications for the role of firm size, bargaining power, asset maturity structure, and managerial incentive schemes.
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
|Date of creation:||Jan 1994|
|Date of revision:|
|Contact details of provider:|| Phone: 44 - 20 - 7183 8801|
Fax: 44 - 20 - 7183 8820
|Order Information:|| Email: |
When requesting a correction, please mention this item's handle: RePEc:cpr:ceprfm:0044. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()The email address of this maintainer does not seem to be valid anymore. Please ask to update the entry or send us the correct email address
If references are entirely missing, you can add them using this form.