We provide an explanation for loan commitments unrelated to borrower credit-worthiness. In our model, banks can use loan commitments to reduce uncertainty regarding their own future funding needs. Given a cost advantage to banks that can acquire such information, there exists an equilibrium...

The authors provide an explanation for loan commitments unrelated to borrower creditworthiness. In their model, banks can use loan commitments to reduce uncertainty regarding their own future funding needs. Given a cost advantage to banks that can acquire such information, there exists an...

The authors study the issue of commercial bank underwriting of securities. Their analysis examines the incentive conflict faced by intermediaries that both lend and underwrite securities, thereby imposing a cost on their customers seeking to raise capital. Despite this cost, firms may choose to...

The authors analyze debt renegotiation between a lender and a sovereign borrower. A sovereign, endowed with tradable and nontradable goods technologies and debt outstanding, may have the incentive to shift production to nontradable goods if lenders are able to seize foreign assets generated by...

We examine implications of a society's cultural emphasis on moral sentiments. Entrepreneurs and investors interact in a game that entails both adverse selection and moral hazard; entrepreneurs may attempt to breach their contracts and expropriate investors. An agent is born into a particular...

We analyze a signaling game where firms' dividend announcements convey private information but the possible need to externally finance the dividend creates an incentive conflict between inside and outside investors. Consequently, the attempt to address an adverse selection problem creates (or...