We present a model with agency costs where heterogeneous firms raise finance through either bank loans or corporate bonds, and where banks are more efficient than the market in resolving informational problems. The model is used to analyze some major long-run differences in corporate finance...

We present a dynamic general equilibrium model with agency costs where: i) firms are heterogeneous in the risk of default; ii) they can choose to raise finance through bank loans or corporate bonds; and iii) banks are more efficient than the market in resolving informational problems. The model...

"We present a dynamic general equilibrium model with agency costs where: i) firms are heterogeneous in the risk of default; ii) they can choose to raise finance through bank loans or corporate bonds; and iii) banks are more efficient than the market in resolving informational problems. The model...

We present a dynamic general equilibrium model with agency costs, where heterogenous firms choose among two alternative instruments of external finance - coporate bonds and bank loans. We characterize the financing choice of firms and the endogeous financial structure of the economy. The...