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In this paper we develop a contingent valuation model for zero-coupon bonds with default. In order to emphasize the role of maturity time and place of the lender's claim in the hierarchy of debt of a Þrm, we consider a Þrm that issues two bonds with different maturities and different seniorage. The model allows us to analyze the implications of both debt renegotiation and capital structure of a Þrm on the prices of bonds. We obtain that renegotiation brings about a signiÞcant change in the bond prices and that the effect is dispersed through different channels: increasing the value of the Þrm, reallocating payments, and avoiding costly liquidation. Moreover, the presence of two creditors leads to qualitatively different implications for pricing, while emphasizing the importance of bond covenants and renegotiation of the entire debt.

In this paper I analyze how corporate governance affects the performance of financial markets. I model the interaction between a firm's manager and its shareholders, and highlight the role played by the dividend report in information revelation and information transmission. The model shows that corporate governance mechanisms affect the market liquidity of the firm's stock (high monitoring costs and low ownership concentration lead to high market liquidity). Moreover, the effect of governance provisions that are aimed to improve financial transparency depends on the other corporate governance characteristics of the firm. Thus, disclosure of information by management associated with poor governance mechanisms may lead to an increase in the uncertainty about the liquidation value of the firm and therefore to a decrease in market liquidity.

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