We examine the interaction between investment and financing policies in a dynamic model for a firm with existing assets-in-place and a growth option, of which investment cost is financed with equity and contingent convertible bond (CoCo). We attempt to clarify how CoCo impacts on investment...

Many SMEs and young entrepreneurs experience financing constraints due to their low credibility and information asymmetry. To this end, a partial guarantee agreement is popular with Chinese entrepreneurs. In this paper, we consider an SME with a funding gap, who wants to invest in a project, of...

This paper aims to clarify how contingent convertible bond (CCB) as a debt financing instrument affects the firm's investment policy, agency cost of debt and capital structure. We consider two different conversion thresholds of CCB: One is endogenous and the other is exogenous. We find that...

This paper examines how contingent convertible bonds (CoCos) outstanding impact on expansion investment under exogenous and endogenous conversion threshold. We provide a relatively formal method to price general corporate securities. We find that under an exogenous conversion threshold, there is...

We consider an entrepreneur who has no assets in place but possesses an option to invest in a project incurring a lump-sum investment cost, of which a fraction must be financed by entering into an equity-for-guarantee swap. The entrepreneur is exposed to macroeconomic risk as well as...