User Specialization and Asset Financing
Michel A. Habib
University of Zurich; Ecole Polytechnique Fédérale de Lausanne - Swiss Finance Institute
D. Bruce Johnsen
George Mason University - School of Law; PERC - Property and Environment Research Center
London Business School Institute of Finance and Accounting Working Paper 196
This paper provides a common explanation for a variety of asset financing arrangements that are observed in practice, specifically leasing, secured debt, project finance without recourse, and vendor financing. Such arrangements are viewed as serving to allocate ownership of one or many assets to those users best able to make use of these assets, in a manner that precludes ex-post bargaining and therefore avoids the distortion of ex-ante investment. The paper also provides a partial explanation for the various levels of seniority of debt.
JEL Classification: G12
Date posted: May 7, 1998
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