Author: | Dewatripont, M. Legros, P. Matthews, S. A. |
Title: | Moral hazard and capital structure dynamics |
Journal: | Journal of the European Economic Association
2003 : JUN, VOL. 1:4, p. 890-930 |
Index terms: | Moral hazard Capital structure of companies |
Language: | eng |
Abstract: | The authors base a contracting theory for a startup firm on an agency model with observable but nonverifiable effort, and renegotiable contracts. Two essential restrictions on simple contracts are imposed: the entrepreneurship must be given limited liability, and the investor's earnings must not decrease in the realized profit of the firm. |
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