Optimal financial contracting and the effects of firm's size

• 成果类型: Article
• 署名作者: Brusco, Sandro; Lopomo, Giuseppe; Ropero, Eva; Villa, Alessandro T.
• 署名单位: State University of New York (SUNY) System; Stony Brook University; European University of Madrid; Duke University
• 刊物名称: RAND JOURNAL OF ECONOMICS
• ISSN/ISSBN: 0741-6261
• DOI: 10.1111/1756-2171.12375
• 发表日期: 2021
• 页码: 446-467
• 关键词: optimal lending contracts; INVESTMENT; MARKETS; GROWTH; AGENCY

摘要

We consider the design of the optimal dynamic policy for a firm subject to moral hazard problems. With respect to the existing literature we enrich the model by introducing durable capital with partial irreversibility, which makes the size of the firm a state variable. This allows us to analyze the role of firm's size, separately from age and financial structure. We show that a higher level of capital decreases the probability of liquidation and increases the future size of the firm. Although analytical results are not available, we show through simulations that, conditional on size, the rate of growth of the firm, its variability, and the variability of the probability of liquidation decline with age.