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- W2978132337 abstract "Abstract This paper studies a financial contracting problem where a firm privately observes its cash flow and faces a limited liability constraint. The firm's collateral is piecemeal divisible and can only be liquidated continuously by resorting to the service of a costly third party, typically associated with bankruptcy. In this situation, multi-class collateralized debt is optimal, in which the firm makes several debt-like promises with a seniority structure. The decision over continuous and piecemeal liquidation depends on both the cost of introducing the third party and the firm's funding need. Allowing the firm to refinance ex-post through surreptitious liquidation may reduce the firm's ex-ante payoff, consistent with covenants in debt contracts prohibiting the sale of assets." @default.
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- W2978132337 date "2019-11-01" @default.
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- W2978132337 title "Incentive-compatibility, limited liability and costly liquidation in financial contracting" @default.
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- W2978132337 doi "https://doi.org/10.1016/j.geb.2019.09.011" @default.
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