Banal-Estañol, Albert; Ottaviani, Marco; Winton, Andrew - In: Review of Financial Studies 26 (2013) 12, pp. 3142-3181
This paper characterizes when joint financing of two projects through debt increases expected default costs, contrary to conventional wisdom. Separate financing dominates joint financing when risk-contamination losses--that are associated with the contagious default of a well-performing project...