advantages of debt against the risk of costly default. The costs of default are endogenous: bankrupt firms are forced to …, firms’ investment is too low and, although the capital structure is chose optimally, in equilibrium too little debt is used …

, trading off the tax advantages of debt against the risk of costly default. The costs of bankruptcy are endogenously determined … constrained inefficient. In particular there is too little debt and too little default. …

This paper develops a new model of debt renegotiation in a structural framework, that accounts for both taxes and … coupon reduction to creditors, given that the new coupon is chosen such that debt value remains constant. Our result shows … firm without hurting the creditors. This model of debt renegotiation can be viewed as a way of passing from a junk bond to …

We argue that the prospect of an imperfect enforcement of debt contracts in default reduces shareholder … predictions, we use a large panel of firms in 41 countries with heterogeneous debt enforcement characteristics. Consistent with … our model, we find that the relation between debt enforcement and firms' investment and risk depends on the firm …

We analyse the role of debt in persuading an entrepreneur to pay out cash flows, rather than to divert them. In the … first part of the paper we study the optimal debt contract--specifically, the trade-off between the size of the loan and the … repayment--under the assumption that some debt contract is optimal. In the second part we consider a more general class of (non-debt …

differ dramatically across the different states. While increasing the level of these exemptions causes less debt to be held …

that the optima verification is deterministic. We also discuss the conditions under which the optimal contract is a debt …