Abstract

http://ssrn.com/abstract=273255
 
 

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Optimal Lending Contracts and Firm Dynamics


Rui A. Albuquerque


Boston University - School of Management; Católica-Lisbon School of Business and Economics; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Hugo A. Hopenhayn


University of California, Los Angeles (UCLA) - Department of Economics

June 2001

Simon School of Business Working Paper No. FR 01-08

Abstract:     
We develop a general dynamic model in which borrowing constraints arise endogenously as part of a constrained-efficient contract when borrowers face limited liability and debt repayment cannot be perfectly enforced. The model is qualitatively consistent with some stylized facts on the growth and survival of firms. We derive implications for the study of financing constraints and the capital structure choices of constrained firms.

Number of Pages in PDF File: 44

Keywords: Financial constraints, imperfect enforcement, firm dynamics, capital structure, debt maturity.

JEL Classification: D92, F34, G31, G32, G35

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Date posted: September 6, 2001  

Suggested Citation

Albuquerque, Rui A. and Hopenhayn, Hugo A., Optimal Lending Contracts and Firm Dynamics (June 2001). Simon School of Business Working Paper No. FR 01-08. Available at SSRN: http://ssrn.com/abstract=273255 or http://dx.doi.org/10.2139/ssrn.273255

Contact Information

Rui A. Albuquerque (Contact Author)
Boston University - School of Management ( email )
595 Commonwealth Avenue
Boston, MA MA 02215
United States
HOME PAGE: http://people.bu.edu/ralbuque/
Católica-Lisbon School of Business and Economics ( email )
Caminho da Palma de Cima
Lisbon, 1649-023
Portugal
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
European Corporate Governance Institute (ECGI) ( email )
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
Hugo A. Hopenhayn
University of California, Los Angeles (UCLA) - Department of Economics ( email )
Box 951477
Los Angeles, CA 90095-1477
United States
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