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Author : Zsuzsanna Fluck
Publisher :
ISBN 13 :
Total Pages : 36 pages
Book Rating : 4.:/5 (455 download)
Download or read book Optimal Financing Contracting written by Zsuzsanna Fluck and published by . This book was released on 1998 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Peter M. DeMarzo
Publisher :
ISBN 13 :
Total Pages : 44 pages
Book Rating : 4.:/5 (129 download)
Download or read book Optimal Long-Term Financial Contracting with Privately Observed Cash Flows written by Peter M. DeMarzo and published by . This book was released on 2004 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: We characterize the optimal long-term financial contract in a setting in which a risk-neutral agent with limited capital seeks financing for a project that pays stochastic cash flows over many periods. These cash flows are observable to the agent but not to investors. The agent can be induced to pay investors via the threat of the loss of control of the project. After solving for the contract as an optimal mechanism, we demonstrate that it can be implemented by a combination of equity, long-term debt and a line of credit - very simple, standard securities. Thus our model provides a theory of capital structure, capturing both optimal debt maturity and debt vs. equity financing. Equity is issued to investors and is also used for the agent's compensation. In equilibrium, the agent may default on the debt and control of the project may pass to debt holders. The optimal capital structure is robust in the sense that it is independent of the amount financed and under certain circumstances, independent of the severity of the moral hazard problem. We also show how our characterization applies to settings in which the agent undertakes hidden effort, or can alter the risk of cash flows.
Author : Peter M. DeMarzo
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (129 download)
Download or read book Optimal Long-Term Financial Contracting written by Peter M. DeMarzo and published by . This book was released on 2010 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We develop an agency model of financial contracting. We derive long-term debt, a line of credit, and equity as optimal securities, capturing the debt coupon and maturity; the interest rate and limits on the credit line; inside versus outside equity; dividend policy; and capital structure dynamics. The optimal debt-equity ratio is history dependent, but debt and credit line terms are independent of the amount financed and, in some cases, the severity of the agency problem. In our model, the agent can divert cash flows; we also consider settings in which the agent undertakes hidden effort, or can control cash flow risk.
Author : Oliver D. Hart
Publisher : Oxford University Press
ISBN 13 : 0198288816
Total Pages : 239 pages
Book Rating : 4.1/5 (982 download)
Download or read book Firms, Contracts, and Financial Structure written by Oliver D. Hart and published by Oxford University Press. This book was released on 1995-10-05 with total page 239 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book provides a framework for thinking about economic instiutions such as firms. The basic idea is that institutions arise in situations where people write incomplete contracts and where the allocation of power or control is therefore important. Power and control are not standard concepts in economic theory. The book begins by pointing out that traditional approaches cannot explain on the one hand why all transactions do not take place in one huge firm and on the other handwhy firms matter at all. An incomplete contracting or property rights approach is then developed. It is argued that this approach can throw light on the boundaries of firms and on the meaning of asset ownership. In the remainder of the book, incomplete contacting ideas are applied to understandfirms' financial decisions, in particular, the nature of debt and equity (why equity has votes and creditors have foreclosure rights); the capital structure decisions of public companies; optimal bankruptcy procedure; and the allocation of voting rights across a company's shares. The book is written in a fairly non-technical style and includes many examples. It is aimed at advanced undergraduate and graduate students, academic and business economists, and lawyers as well as those with aninterest in corporate finance, privatization and regulation, and transitional issues in Eastern Europe, the former Soviet Union, and China. Little background knowledge is required, since the concepts are developed as the book progresses and the existing literature is fully reviewed.
Author : Catherine Casamatta
Publisher :
ISBN 13 :
Total Pages : 44 pages
Book Rating : 4.X/5 (4 download)
Download or read book Financing and Advising written by Catherine Casamatta and published by . This book was released on 2002 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Karoline Jung-Senssfelder
Publisher : Springer Science & Business Media
ISBN 13 : 3835091883
Total Pages : 301 pages
Book Rating : 4.8/5 (35 download)
Download or read book Equity Financing and Covenants in Venture Capital written by Karoline Jung-Senssfelder and published by Springer Science & Business Media. This book was released on 2007-12-08 with total page 301 pages. Available in PDF, EPUB and Kindle. Book excerpt: Karoline Jung-Senssfelder presents the first augmented contracting analysis, focusing on the interaction of both, financial instruments and covenants, in the creation of incentives to the contracting parties. With a focus on the German market, she integrates the findings of her model-based theoretical and survey-based empirical analyses to derive value-adding implications for an incentive-compatible contract design in the German venture capital market.
Author : Roman Inderst
Publisher :
ISBN 13 :
Total Pages : 32 pages
Book Rating : 4.:/5 (129 download)
Download or read book Internal Vs. External Financing written by Roman Inderst and published by . This book was released on 2008 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper compares optimal financial contracts with centralized and decentralizedfirms. Under centralized contracting headquarters raises funds on behalf of multiple projects and then allocates the funds on the firm s internal capital market. Under decentralized contracting each project raises funds separately on the external capital market. The benefit of centralization is that headquarters can use excess liquidity from high-cash flow projects to buy continuation rights for low cash-flow projects. This allows headquarters to make greater repayments to investors, which eases financing constraints ex ante. The cost is that headquarters may pool cash flows from several projects, thereby accumulate internal funds, and make follow-up investments without having to return to the capital market. Absent any capital market discipline, however, it is more difficult for investors to force headquarters to pay out funds, which tightens ex-ante financing constraints.
Author : Roman Inderst
Publisher :
ISBN 13 :
Total Pages : 32 pages
Book Rating : 4.:/5 (215 download)
Download or read book Internal Vs. External Financing written by Roman Inderst and published by . This book was released on 2002 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Roman Inderst
Publisher :
ISBN 13 :
Total Pages : 0 pages
Book Rating : 4.:/5 (133 download)
Download or read book Internal Versus External Financing : an Optimal Contracting Approach written by Roman Inderst and published by . This book was released on 2002 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Roman Inderst
Publisher :
ISBN 13 :
Total Pages : 0 pages
Book Rating : 4.:/5 (215 download)
Download or read book Internal Vs. External Financing written by Roman Inderst and published by . This book was released on 2002 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Matthew I. Spiegel
Publisher :
ISBN 13 :
Total Pages : 29 pages
Book Rating : 4.:/5 (129 download)
Download or read book Optimal Financial Contracts for a Start-Up with Unlimited Operating Discretion written by Matthew I. Spiegel and published by . This book was released on 2000 with total page 29 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper presents a model in which asymmetric information and extreme uncertainty lead to the exclusive use of equity and riskless debt for small business financing. The paper derives these results without any restrictions on the available contract space, the distribution function governing a project?s payoff, or the risk aversion of most potential entrepreneurs. Linear securities derive from the assumption that small business financing involves more uncertainty than is captured in most financial models. Instead of assuming that business people are faced with a given menu of projects, the model allows entrepreneurs to create (over time) an unlimited number of non-positive net present value projects with any payoff distribution they desire. Also, outside investors cannot observe project choice but only terminal cash flows. As a result, suppliers of funds must design contracts so that in equilibrium entrepreneurs do not wish to undertake undesirable investments. Further analysis of the model shows that in equilibrium entrepreneurs must contribute some of their own capital. The paper also finds that when a firm does not have any collateralizable assets, the equilibrium funding agreements have the property that the investors split the project?s proceeds in proportion to their initial investments. We further demonstrate that the existence of an infinite number of non-positive NPV projects can lead in equilibrium to positive abnormal returns earned by outside financiers. The model also produces a pecking order theory of financing. It is shown that highly profitable firms, and/or those companies run by relatively risk neutral individuals will first try to raise funds with riskless debt, and then turn to equity only when the supply of riskless debt has been exhausted. Finally, the paper shows that the linearity of the equilibrium contracts derives from the entrepreneur?s discretion with regard to the payoff distribution, rather than the flexibility associated with non-positive NPV projects. As part of the same analysis, we also demonstrate that under some conditions our underpricing results can be derived solely from the infinite supply of non-positive NPV projects.
Author : Katrin Tinn
Publisher :
ISBN 13 :
Total Pages : 46 pages
Book Rating : 4.:/5 (13 download)
Download or read book Blockchain and the Future of Optimal Financing Contracts written by Katrin Tinn and published by . This book was released on 2018 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt: Blockchain technology makes it possible to create immutable smart contracts that are based on reliable and timestamped records of transactions. These new features imply that contracts for raising external financing could now depend on when, and not just on whether, positive cash flows occur. Such flexibility is bound to become increasingly important in a dynamic moral hazard environment where entrepreneurs can learn from data and make effort choices more and more frequently. This paper develops a theoretical model of contract design in the new blockchain environment, and shows that the optimal contract is a relatively simple and dynamically adjusting splitting rule. Under this type of smart contract, external financing would be as cheap as internal funds and more accessible to agents with no internal funds. In contrast, traditional debt and equity would likely become more expensive, as there would be more frequent effort decisions and learning. Furthermore, debt would become inferior to equity in this new environment, as the blockchain eliminates the need for costly verification, and as more frequent decision making magnifies the negative features of debt contracts.
Author : Andrew Ross
Publisher : John Wiley & Sons
ISBN 13 : 1405125063
Total Pages : 458 pages
Book Rating : 4.4/5 (51 download)
Download or read book Financial Management in Construction Contracting written by Andrew Ross and published by John Wiley & Sons. This book was released on 2013-01-29 with total page 458 pages. Available in PDF, EPUB and Kindle. Book excerpt: This authoritative text provides a detailed insight into how construction companies manage their finances at both corporate and project level. It will guide students and practitioners through the complexities of the financial reporting of construction projects within the constraints of accepted accounting practice. The book is written for non-accountants and from a contractor’s perspective and is equally relevant to subcontractors and main contractors. The authors examine the relationship between the external annual accounts and the internal cost-value reconciliation process. CVR is covered in depth and the authors consider issues such as interim payments, subcontract accounts, contractual claims, final accounts, cash flow management and the reporting of the physical and financial progress of contracts. A broad perspective of all the financial aspects of contracting is taken along with related legal issues and the authors explain how things operate in the ‘real world’. They describe good practice in financial control while at the same time being honest about some of the more questionable practices that can - and do - happen. The approach taken is unique as the financial management of construction projects is considered from the perspective of the contractor’s quantity surveyor. The book deals with the real issues that surveyors have to address when using their judgment to report turnover, profitability, cash flow, and work in progress on projects and the financial problems faced by subcontractors are frankly and pragmatically explored. The payment and notice requirements of the Construction Act are explained in detail and relevant provisions of JCT2011, NEC3, ICC, DOM/1 and other standard contracts and subcontracts are also covered. Financial Management in Construction Contracting addresses the wide variety of external factors that influence how construction companies operate, including government policy, banking covenants and the financial aspects of supply chain management. Cost reporting systems are described and real-life examples are used to illustrate cost reports, accrual systems and how computerised systems can be employed to provide the QS with information that can be audited. Examples drawn from practice demonstrate how work-in-progress (WIP) is reported in contracting. Cost value reconciliation reports are featured and the book demonstrates how adjustments are made for overmeasure, undermeasure, subcontract liabilities and WIP as well as explaining the processes that contractors use when analysing external valuations. This is the ideal core text for final year degree and post-graduate level modules on Quantity Surveying, Commercial Management, Construction Management and Project Management courses and will provide an invaluable source of reference for quantity surveyors and others who may be engaged in the financial management of construction projects. The book’s companion website at www.wiley.com/go/rossfinancialmanagement offers invaluable resources for students and lecturers as well as for practising construction managers: end-of-chapter exercises + outline answers PowerPoint slides for each chapter ideas for discussion topics links to useful websites
Author : Zsuzsanna Fluck
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (129 download)
Download or read book Optimal Financial Contracting written by Zsuzsanna Fluck and published by . This book was released on 1998 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper presents a theory of outside equity based on the control rights and the maturity design of equity. We show that outside equity is a tacit agreement between investors and management supported by equityholders' right to dismiss management regardless of performance and by the lack of a prespecified expiration date on equity. As a tacit agreement outside equity is sustainable despite management's potential for manipulating the cash flows and regardless of how costly it is for equity holders to establish a case against managerial wrongdoing. We establish that the only outside equity that investors are willing to hold in equilibrium is that with unlimited life, the very outside equity that corporations issue. Consistent with empirical evidence, this model predicts that debt-equity ratios are higher (lower) in industries withlow (high) cash flow variability.
Author : DongJoon Han
Publisher :
ISBN 13 :
Total Pages : 45 pages
Book Rating : 4.:/5 (13 download)
Download or read book Optimal Financial Contracting and Risk-Shifting written by DongJoon Han and published by . This book was released on 2019 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: I study optimal financial contracting when neither cash flows nor the risk profile of project choices are verifiable. Using a contracting framework, I show the resulting two frictions (cash-diversion and asset-substitution) are intricately linked: to address the cash-diversion problem, an optimal contract resembles a debt contract, which in turn causes the asset-substitution problem. A key finding of this paper is that, due to the potential shift of control rights to the investor, the firm does not have an excessive risk-taking incentive; in fact, my model predicts that the firm may choose an excessively safe risk-profile. Also, my model highlights the role of the financial market structure (private vs. public debt): the asset substitution problem increases the cost of public debt, but lowers that of private debt. Strikingly, however, regardless of the market structure, the asset-substitution problem leads to a more efficient risk-profile choice.
Author : Alexander Allan Robichek
Publisher :
ISBN 13 :
Total Pages : 182 pages
Book Rating : 4.F/5 ( download)
Download or read book Optimal Financing Decisions written by Alexander Allan Robichek and published by . This book was released on 1965 with total page 182 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Jukka Vauhkonen
Publisher :
ISBN 13 :
Total Pages : 148 pages
Book Rating : 4.3/5 ( download)
Download or read book Essays on Financial Contracting written by Jukka Vauhkonen and published by . This book was released on 2005 with total page 148 pages. Available in PDF, EPUB and Kindle. Book excerpt: Tiivistelmä.
