Optimal financial contracting and debt maturity structure under adverse selection

Authors

  • Jorge Fernández Ruiz El Colegio de México, A.C.

DOI:

https://doi.org/10.24201/ee.v17i1.200

Keywords:

financial contracting, debt

Abstract

We analyze a model in which a risk-averse country finances its development project under asymmetric information. Before the project renders its fruits, two types of news will become available, one of which will reduce the asymmetry of information between the country and its investors. We characterize the optimal financial contract both when complete financial contracting is possible and when the country is restricted to using only short-term and long-term debt.

Downloads

Download data is not yet available.

References

Calvo, G. and E. Mendoza (1996). “Mexico's balance of Payments Crisis: A Chronicle of a Death Foretold”, Journal of International Economics, 41, pp. 235-264.

Cole, H. and T. J. Kehoe (1996). “A Self-fulfilling Model of Mexico´s 1994-1995 Debt Crisis”, Journal of International Economics, 41, pp. 309-330.

Diamond, D. W. (1991). “Debt Maturity Structure and Liquidity Risk”, Quarterly Journal of Economics, 106, pp. 709-737.

Diamond, D. W. (1993). “Bank Loan Maturity and Priority when Borrowers Can Refinance”, in C. Mayer and X. Vives (eds.), Capital Markets and Financial Intermediation, Cambridge University Press.

Dornbusch, R. (1989). “Debt Problems and the World Macroeconomy”, in J. Sachs (ed.), Developing Country Debt and Economic Performance, The University of Chicago Press.

Flannery, M. J. (1986). “Asymmetric Information and Risky Debt Maturity Choice”, Journal of Finance, 41, pp. 19-38.

Gale, D. and M. Hellwig (1985). “Incentive-Compatible Debt Contracts: The One Period Problem”, Review of Economic Studies, 52, pp. 647-664.

Krasa, S. and A. Villamil (2000). “Optimal Contracts when Enforcement is a Decision Variable”, Econometrica, 68, pp. 119-134.

Sachs, J., A. Tornell and A. Velasco (1996). “The Mexican Peso Crisis: Sudden Death of Death Foretold?”, Journal of International Economics, 41, pp. 265-284.

Downloads

Published

2002-01-01

How to Cite

Fernández Ruiz, J. (2002). Optimal financial contracting and debt maturity structure under adverse selection. Estudios Económicos De El Colegio De México, 17(1), 37–65. https://doi.org/10.24201/ee.v17i1.200
Metrics
Views/Downloads
  • Abstract
    409
  • PDF
    143

Issue

33-vol. 17, no. 1, january-june, 2002

Section

Articles

Metrics