We rationalize fixed rate loan commitments (forward credit contracting with options) in a competitive credit market with universal risk neutraility. Future interest rates are random, but there are no transactions costs. Borrowers finance projects with bank loans and choose ex post unobseravable...

This paper develops a model in which managers can signal their firms' true values by using either a dividend or a stock repurchase or both. The authors explain a number of sylized facts about these cash- disbursement mechanisms, particularly those concerning the relative magnitudes of stock...

In this paper we explore the nature of equilibria in an asymmetrically informed bank credit market in which credit applicants know their own (intrinsic) default risks, but potential lenders can discover these default risks only by expending resources to produce information. The resolution of...

This paper studies the dynamic investment policies of firms under asymmetric information. Managers make decisions to maximize the wealth of existing shareholders. In equilibrium, the superior firms invest 'myopically', choosing intrinsically lower-valued projects that produce 'early' cash flows....

We study a competitive credit market equilibrium in which all agents are risk neutral and lenders a priori unaware of borrowers' default probabilities. Admissible credit contracts are characterized by the credit granting probability, the loan quantity, the loan interest rate and the collateral...

An economic rationale is provided for the competitive equilibrium deployment of commitment and usage fees in loan commitment pricing. It is shown that, under perfect information, assessing both fees rather than just one permits optimal risk sharing. When the borrower is privately informed about...

This paper develops a theory of choice among alternative procedures for distributing cash from corporations to shareholders. Despite the preferential tax treatment of capital gains for individual investors, it is shown that a majority of a firm's shareholders may support a dividend payment for...

We analyze risk-sensitive, incentive-compatible deposit insurance in the presence of private information and moral hazard. Without deposit-linked subsidies it is impossible to implement risk-sensitive, incentive- compatible deposit insurance pricing in a competitive, deregulared environment,...