We present a model of financial contracting in the presence of asymmetric information between entrepreneur and investor. Either liquidation threat or governance control can be used to protect investor’s interests against expropriation risk. The two parties first agree to a financial...

We present a novel theory to explain the puzzling issue regarding why certain firms in financial distress, that must renegotiate their debt prefer a formal bankruptcy procedure, which is more costly, over direct negotiations with their debtholders. Specifically, we show that claimholders’...

The recent financial and economic crisis has brought back the attention to studying the characteristics of surviving firms and those exiting the market. Among these characteristics the access to finance has received large attention, since the economic crisis decreased the availability of finance...

This study is dedicated to an important aspect of the long-run performance of firms, namely their survival under rapidly changing conditions in a transition economy. The analysis is focused on the question of whether privatization and ownership structure have affected the likelihood of...

This paper derives closed-form solutions for values of debt and equity in a continuoustime structural model in which the demands of creditors to be repaid cause a firm to be put into bankruptcy. This allows discussing the effect of creditor coordination in recovering money on the values of debt,...

We develop a model in which cash-constrained entrepreneurs seeks a venture capitalist (VC) to finance a new firm. Costly monitoring is employed by VCs to reduce entrepreneurial moral hazard. When monitoring reveals poor performance, VCs want to punish the entrepreneur with liquidation. However,...

Large-scale corporate restructuring made necessary by a financial crisis is one of the most daunting challenges faced by economic policymakers. The financial crisis at the end of 2008 has brought back , in the Romanian economy too, the problem of the negative economic growth, of the massive...

Can debt rescheduling decisions differ in multiple lenders’ versus a single lender loan? Do multiple lenders efficiently react to information? We show that the precision of information plays an essential role. Foreclosing by one lender is disruptive so that a lender can rationally wait for the...