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Preemption, start-up decisions and the firms' capital structure

Moretto, Michele; Panteghini, Paolo M. - 2007

In this article, we analyse the interactions between financial and start-up decisions in an oligopolistic framework, where firms compete to enter a new market. We show that preemption can substantially reduce the negative effects of credit rationing on start-up investment decisions.

Persistent link: https://www.econbiz.de/10010264136

Product market competition, investment and employment-abundant versus job-poor growth : a real options perspective

Chen, Yu-Fu; Funke, Michael - 2005

The role of product market reforms in achieving the objective of higher employment and growth has recently received much attention amongst academics. The aim of this paper is to analyse some of the channels through which cross-market effects come about and to assess their policy relevance. The...

Persistent link: https://www.econbiz.de/10010271923

Booms, recessions and financial turmoil : a fresh look at investment decisions under cyclical uncertainty

Chen, Yu-Fu; Funke, Michael - 2009

The paper studies the interaction between cyclical uncertainty and investment in a stochastic real option framework where demand shifts stochastically between three different states, each with different rates of drift and volatility. In our setting the shifts are governed by a three-state Markov...

Persistent link: https://www.econbiz.de/10010271966

Application of stochastic optimal control to financial market debt crises

Stein, Jerome L. - 2009

This interdisciplinary paper explains how mathematical techniques of stochastic optimal control can be applied to the recent subprime mortgage crisis. Why did the financial markets fail to anticipate the recent debt crisis, despite the large literature in mathematical finance concerning optimal...

Persistent link: https://www.econbiz.de/10010276757

Do Zombies Rise When Interest Rates Fall? A Relationship Banking Model

Herweg, Fabian; Kähny, Maximilian - 2022

An entrepreneur chooses a relationship bank or market finance. The advantage of bank finance is that the quality of the entrepreneur’s project is identified early, allowing to liquidate low-quality projects. The loan contract induces an efficient continuation decision if the entrepreneur has...

Persistent link: https://www.econbiz.de/10013296271

Selling Dreams : Endogenous Optimism in Lending Markets

Bridet, Luc - 2020

We propose a simple model of borrower optimism in competitive lending markets with asymmetric information. Borrowers in our model engage in self-deception to arrive at a belief that optimally trades off the anticipatory utility benefits and material costs of optimism. Lenders' contract design...

Persistent link: https://www.econbiz.de/10012834361

Asymmetric information and overinvestment in quality

Belleflamme, Paul; Peitz, Martin - 2009

In a standard adverse selection world, asymmetric information about product quality leads to quality deterioration in the market. Suppose that a higher investment level makes the realization of high quality more likely. Then, if consumers observe the investment (but not the realization of...

Persistent link: https://www.econbiz.de/10010264613

Uncertainty and the Cost of Bank vs. Bond Finance

Grimme, Christian - 2019

How does uncertainty affect the costs of raising finance in the bond market and via bank loans? Empirically, this paper … finds that heightened uncertainty is accompanied by an increase in corporate bond yields and a decrease in bank lending … the value of the lending relationship and lowers the lending rate. Bond investors demand compensation for the increased …

Persistent link: https://www.econbiz.de/10012892132

On the Preferences of CoCo Bond Buyers and Sellers

Caporale, Guglielmo Maria - 2020

This paper estimates the preference scores of CoCo bond buyers and sellers by running multinomial logistic regressions … taking into account both bond and issuing banks' characteristics; it also provides evidence on the role of country …−specific CoCo bond market concentration. Buyers are defined as having a preference for CoCo bonds if their return−to−risk is higher …

Persistent link: https://www.econbiz.de/10012849808

Insurance for Catastrophes - Indemnity vs. Parametric Insurance with Imperfect Information

Feess, Eberhard; Jordan, Cathrin; Noy, Ilan - 2022

Insurance for natural hazards - earthquakes, hurricanes, or pandemics - is rarely comprehensively adopted without intense government intervention, and even then it is often only a minority of properties or businesses that are insured. Efforts to close this insurance gap include the introduction...

Persistent link: https://www.econbiz.de/10013296268