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Dynamic Financial Contract under Extended Liability

B. Coestier

Ecole des Hautes Etudes Commerciales de Montreal- from Ecole des Hautes Etudes Commerciales de Montreal-Chaire de gestion des risques.

Abstract: We consider an entrepreneur looking for external financing who may face two types of independent financial risks: a risk associated with its activity and a risk associated with an environmental accident. Using a costly state verification model, we characterize the optimal two-period financial contract under a law on liability allowing for extended liability to lenders.

Keywords: RISK; ENVIRONMENT; ASSURANCE (search for similar items in EconPapers)
JEL-codes: D23 D82 G22 G33 K32 (search for similar items in EconPapers)
Date: 2000
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Persistent link: https://EconPapers.repec.org/RePEc:fth:etcori:00-08

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