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- W3121389026 abstract "We study capital markets in which investors compete by designing financial contracts to control an entrepreneur’s ability to side trade and default on multiple loans. We show that covenants may have anticompetitive effects: in particular, they prevent investors from providing additional funds and reduce the entrepreneur’s investment capacity. As a result, a large number of inefficient allocations is supported at equilibrium. We propose a subsidy mechanism similar to guarantee funds in financial markets that efficiently controls the entrepreneur’s side trading and sustains the competitive allocation as the unique equilibrium one. (JEL D21, D82, D86, G21, G32)" @default.
- W3121389026 created "2021-02-01" @default.
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- W3121389026 date "2019-05-01" @default.
- W3121389026 modified "2023-09-30" @default.
- W3121389026 title "Multiple Lenders, Strategic Default, and Covenants" @default.
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- W3121389026 doi "https://doi.org/10.1257/mic.20170189" @default.
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