A tractable model of limited enforcement and the life-cycle dynamics of firms

Hengjie Ai, Rui Li

Research output: Contribution to journalArticlepeer-review

Abstract

We develop a continuous-time model of optimal lending contracts under limited enforcement and provide closed-form solutions. We characterize the dynamics of firms’ growth rate, Tobin's Q, and capital structure over their life cycles.

Original languageEnglish (US)
Pages (from-to)136-140
Number of pages5
JournalEconomics Letters
Volume163
DOIs
StatePublished - Feb 2018

Bibliographical note

Publisher Copyright:
© 2017

Copyright:
Copyright 2017 Elsevier B.V., All rights reserved.

Keywords

  • Capital structure
  • Dynamic contract
  • Firm dynamics
  • Limited enforcement

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