optimally choose dynamic capital structure and default times. For a dynamic cross-section of firms, our model endogenously … generates a realistic average term structure and time series of actual default probabilities and credit spreads, together with a …

or the rate of default. …

whether renegotiation occurs and if so, at what cost. When the covenant is not renegotiable or when renegotiation cost is … sufficiently high, more conservative accounting actually reduces the efficiency of debt contracts. When renegotiation cost is small … circumstances, especially for firms with fewer positive NPV projects and higher liquidation values. When renegotiation is costless …