Asymmetric Information, Repeated Lending, and Capital Structure

This paper develops a model of capital structure in a three period agency framework. Borrowers retain earnings to reduce their loan needs, which reduces their probability of default, which allows them to obtain more favorable credit terms. The model is capable of generating persistence of real shock...

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Bibliographic Details
Published in:Journal of money, credit and banking credit and banking, 1993-08, Vol.25 (3), p.393-409
Main Author: Moore, Robert R.
Format: Article
Language:English
Subjects:
Analysis
Asymmetric information
Bank credit
Capital
Capital investments
Capital market
Capital markets
Capital structure
Corporate finance
Corporate profits
Credit
Credit rationing
Debt management
Default
Economic research
Financial investments
Impacts
Interest rates
Lenders
Loans
Lotteries
Mathematical models
Profits
Retained earnings
Citations: Items that cite this one
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Summary:This paper develops a model of capital structure in a three period agency framework. Borrowers retain earnings to reduce their loan needs, which reduces their probability of default, which allows them to obtain more favorable credit terms. The model is capable of generating persistence of real shocks through financial market effects. (Printed by permission of the publisher.)
ISSN:0022-2879
1538-4616
DOI:10.2307/2077770