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Credit rationing, bankruptcy cost, and the optimal debt contract for small business

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  • Ying Yan

Abstract

An examination of whether the costly random verification scheme affects the optimal debt contract for small business. It finds, contrary to Townsend (1979) and Williamson (1986, 1987), that the standard debt contract is the optimal debt contract with the costly random verification scheme.

Suggested Citation

  • Ying Yan, 1997. "Credit rationing, bankruptcy cost, and the optimal debt contract for small business," Working Paper 9702, Federal Reserve Bank of Cleveland.
  • Handle: RePEc:fip:fedcwp:9702
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    References listed on IDEAS

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