| Author: | Chemmanur, T. Fulghieri, P. |
| Title: | Reputation, renegotiation, and the choice between bank loans and publicly traded debt |
| Journal: | Review of Financial Studies
1994 : FALL, VOL. 7:3, p. 475-506 |
| Index terms: | BANK LENDING LOANS DEBT |
| Language: | eng |
| Abstract: | The authors model firms' choice between bank loans and publicly traded debt, allowing for debt renegotiation in the event of financial distress. Entrepreneurs, with private information about their probability of financial distress, borrow from banks (multiperiod players) or issue bonds to implement projects. If a firm is in a financial distress, lenders devote a certain amount of resources (unobservable to entrepreneurs) to evaluate whether to liquidate the firm or to renegotiate its debt. |
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