DEFAULT AND RENEGOTIATION - A DYNAMIC-MODEL OF DEBT

Authors
HART O MOORE J
Citation
O. Hart et J. Moore, DEFAULT AND RENEGOTIATION - A DYNAMIC-MODEL OF DEBT, The Quarterly journal of economics, 113(1), 1998, pp. 1-41
Citations number
24
Categorie Soggetti
Economics
Journal title
The Quarterly journal of economics → ACNP
ISSN journal
00335533
Volume
113
Issue
1
Year of publication
1998
Pages
1 - 41
Database
ISI
SICI code
0033-5533(1998)113:1<1:DAR-AD>2.0.ZU;2-#
Abstract
We analyze the role of debt in persuading an entrepreneur to pay out c ash flows, rather than to divert them. In the first part of the paper we study the optimal debt contract-specifically, the trade-off between the size of the loan and the repayment-under the assumption that some debt contract is optimal. In the second part we consider a more gener al class of(nondebt) contracts, and derive sufficient conditions for d ebt to be optimal among these.