Financial contracting along the business cycle

Andrea Attar

No 2003069, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: The paper investigates the effects of macroeconomic conditions on firms' capital structure. We introduce a repeated lender-borrower interaction that allows for debt and equity financing to co-exist as optimal securities in every period. The presence of asymmetric information in the market for loans is responsible for endogenous fluctuations to take place.It is possible to state sufficient conditions for the overall economy debt-equity ratio to exhibit a counter-cyclical behavior. This result is widely supported by several recent empirical finance works.

Keywords: Optimal financial contracts; endogenous fluctuations (search for similar items in EconPapers)
JEL-codes: D92 G33 (search for similar items in EconPapers)
Date: 2003-10
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://sites.uclouvain.be/core/publications/coredp/coredp2003.html (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cor:louvco:2003069

Access Statistics for this paper

More papers in LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) Voie du Roman Pays 34, 1348 Louvain-la-Neuve (Belgium). Contact information at EDIRC.
Bibliographic data for series maintained by Alain GILLIS ().