The ability of equityholders/managers to partially control the earnings stream by temporarily shutting down to avoid negative earnings has an enormous effect on the choice of capital structure. Increasing switching costs reduces operating flexibility, and reduced operating flexibility implies...

The unobservability of the borrower's action is a major reason that smaller enterprises face high financing costs and credit rationing. We show that bank loans fully monitored by blockchain allow poor firms with low working capital to eliminate this agency cost. Interestingly, this is achieved...