Is there a paradox of pledgeability?

• 成果类型: Article
• 署名作者: Bernhardt, Dan; Koufopoulos, Kostas; Trigilia, Giulio
• 署名单位: University of York - UK; University of Rochester
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2020.05.003
• 发表日期: 2020
• 关键词: Collateral; SECURED DEBT; Pledgeability

摘要

We show that in the limited-commitment framework of Donaldson et al. (2019), firm value always increases in the fraction of cash flows that can be pledged as collateral. That is, pledgeability increases investment efficiency and relaxes a firm's financing constraint. We derive this conclusion using the same contracts considered by the authors and generalize the result to an arbitrary number of states. We also show that the first best can always be implemented by a nonstate-contingent secured debt contract, which differs from the ones they consider. (C) 2020 Elsevier B.V. All rights reserved.