We study the implications of credit market frictions for the dynamics of corporate capital structure and the risk of default of corporations. To do so, we develop a dynamic capital structure model in which firms face uncertainty regarding their ability to raise funds in credit markets and have to search for investors when seeking to adjust their capital structure. We provide a general analysis ...

A theoretical model examines real investment decisions during bankruptcy reorganization and the closing distribution of property rights over capital structure to creditors and equityholders. Estate value is uncertain. Risky real investment levels in firm technology are endogenous and subject to financing constraints with interest rates sensitive to the probability of default and expected credit...

The shocked reaction of commentators to the recent Canadian Supreme Court decision (Chaoulli v. Quebec) overturning Quebec's ban on private healthcare insurance is difficult to square with the facts and policy options realistically open to provincial governments. The problem is that rhetoric has centred on preserving a single-tier universal system that has never existed in the form its supporte...

Empirical evidence documents a tight link between aggregate and firm-level investment and corporate credit spreads. Moreover, it has been shown that credit spreads largely reflect a compensation for bearing macroeconoimc risks. We use a tractable model with recursive preferences and time varying macroeoconomic risk to investigate the link between aggregate risk and corporate policies in a produ...

Investment and financing decisions are generally made under the assumption of a given objective function. Deriving growth from the value of a firm, however, requires the initial size and discount rates to be known a priori. The presentation of financial planning as a standard dynamic optimization problem usually works with overly restrictive assumptions. As an alternative, it is proposed to arr...

Under increasingly stringent environmental regulations, inadequate green input levels from manufacturers may lead to substandard emissions and production shutdown, which further results in the disruption risk of supply chain. This work investigates a chain (GSC) consisting one environmentally regulated manufacturer capital-constrained retailer who faces stochastic market demand. The needs make ...