) product differentiation is valued by customers; (ii) debt is necessary to discipline managers; and (iii) liquidation is costly …

two ideas that have been analysed separately in previous work: some authors argue that due to risk-shifting, debt … bankruptcy. Our model allows for both effects. Given the key role that debt plays in this analysis, we derive debt as an optimal …

things, the theory predicts that the difference in leverage between a debt-friendly bankruptcy code (such as the UK’s) and a … (debt net of cash holdings) and controlling for other firm characteristics that affect leverage. …

We consider the debt capacity of a risky asset when debt is being rolled over and there is a liquidation cost in case … of default. We show that debt capacity depends on how information about the quality of the asset is revealed. When the … structure, debt capacity does not depend upon rollovers and liquidation cost, and is simply equal to expected cash flows from …

taxation, flotation costs of securities, and default costs. They are financed with equity, insured deposits, and risky debt …