A theory of debt maturity and innovation

• 成果类型: Article
• 署名作者: Mitkov, Yuliyan
• 署名单位: University of Bonn
• 刊物名称: JOURNAL OF ECONOMIC THEORY
• ISSN/ISSBN: 0022-0531
• DOI: 10.1016/j.jet.2024.105828
• 发表日期: 2024
• 关键词: innovation; debt; incomplete contracts; RENEGOTIATION

摘要

The financing of innovative firms must balance two competing goals. First, the entrepreneur must be adequately protected from failure to encourage innovation. However, if the attempt to innovate fails, the entrepreneur's firm should be liquidated and its assets redeployed elsewhere. Meeting these two goals is inherently challenging when contracts are incomplete and shaped by ex -post renegotiation. I investigate how firms can choose the maturity of their debt to motivate innovation. The theory highlights a novel interaction between low-powered incentives, renegotiation, and debt maturity.