Recently, a guarantee-investment combination financing mode is popular. This paper considers an entrepreneur who has exclusively an option to invest in a project. The investment is irreversible but delayable with a growth option. Thanks to the financing mode, the initial investment cost is...

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...

We consider a risk-averse entrepreneur who invests in a project with idiosyncratic risk and takes debt financing for diversification benefits. In contrast to the literature, we assume the entrepreneur is unable to get a loan from a bank directly because of the low creditability of the...

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...