We consider a model of external financing in which entrepreneurs are privately informed about the quality of their projects and seek funds from competitive financiers. The literature restricts attention to monotonic or ‘manipulation proof' securities and finds that straight debt is the unique...

Short-term corporate debt as a proportion of total debt issued by public firms varies greatly across countries, between 28% in the U.S. and 78% in China. This paper argues that the interaction between information asymmetry and legal protection of creditors is an important determinant of debt...

We consider a model of external financing in which privately informed entrepreneurs seek funds from competitive financiers. The literature restricts attention to monotonic securities and finds that straight debt is the uniquely optimal. Monotonicity is justified by the argument that it would...