developing a theoretical framework where a firm applies for a bank loan to implement a risky project. The probability of success … increases if the firm exerts a costly managerial extra-effort, but the bank is unable to observe such an effort: a moral hazard … to the effort cost. In this case we find that credit is granted only if the bank hires a management consultant, even when …

with lower bank debt in firms, indicating a substitution effect between bank credit and trade credit when uncertainty rises …