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

Hengjie Ai and Rui Li

Economics Letters, 2018, vol. 163, issue C, 136-140

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.

Keywords: Dynamic contract; Limited enforcement; Firm dynamics; Capital structure (search for similar items in EconPapers)
JEL-codes: D21 D82 G32 (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:163:y:2018:i:c:p:136-140

DOI: 10.1016/j.econlet.2017.11.025

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