Financial Contracting Under Imperfect Enforcement

Ellingsen, Tore; Kristiansen, Eirik Gaard

doi:10.1093/qje/qjq006

Cited by 33 publications

(22 citation statements)

References 49 publications

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“…10 10 A standard argument, similar to the proof of Lemma 1 in Ellingsen and Kristiansen (2011), implies that any contract that violates the retention constraint in some relevant state is suboptimal; there is another contract that yields higher expected pro…t for the …rm.…”

Section: Analyzing the Basic Modelmentioning

confidence: 98%

“…Let the …nancial market's required rate of return be normalized to 0. To capture frictions in the …nancial market, we assume that …nancial contracts be imperfectly enforced, applying a simple version of the model of Ellingsen and Kristiansen (2011): An entrepreneur who diverts resources is apprehended with probability ' < 1. With probability 1 ' the diversion attempt succeeds and the entrepreneur can enjoy the illegally diverted revenues.…”

Section: The Outside Opportunitymentioning

confidence: 99%

“…Applying the arguments of Ellingsen and Kristiansen (2011), the set = and the repayment to external investors r(p) are given by the pro…tability condition,…”

Section: Analyzing the Basic Modelmentioning

confidence: 99%

“…11 By Lemma 1 in Ellingsen and Kristiansen (2011) it is never optimal to o¤er a contract to outside investors that implies that the entrepreneur makes a diversion attempt. subject to (4) and the retention constraint…”

Section: Analyzing the Basic Modelmentioning

confidence: 99%

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Paying for Staying: Managerial Contracts and the Retention Motive

Ellingsen

Kristiansen

2012

SSRN Journal

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Talented managers may leave the …rm in order to work elsewhere. Focusing on the portability of managers'resources, we develop a model in which managerial compensation is designed to prevent ine¢ cient departure. The model rationalizes the widespread use of ‡at salaries in combination with performance-vesting stock options and is consistent with observed di¤erences in compensation contracts across individuals, …rms, industries, and countries.

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Section: Analyzing the Basic Modelmentioning

confidence: 98%

Section: The Outside Opportunitymentioning

confidence: 99%

“…Applying the arguments of Ellingsen and Kristiansen (2011), the set = and the repayment to external investors r(p) are given by the pro…tability condition,…”

Section: Analyzing the Basic Modelmentioning

confidence: 99%

Section: Analyzing the Basic Modelmentioning

confidence: 99%

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Paying for Staying: Managerial Contracts and the Retention Motive

Ellingsen

Kristiansen

2012

SSRN Journal

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“…Meh and Moran (2010) or Gertler and Kiyotaki (2010). A notable extension is Ellingsen and Kristiansen (2011) who develop a static banking model with inside equity, outside equity and deposits. the benefit from retaining the non-pledgeable part of the investment.…”

Section: Bankersmentioning

confidence: 99%

Financial Intermediation, Capital Accumulation and Crisis Recovery

2017

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This paper integrates banks into a two-sector neoclassical growth model to account for the fact that a fraction of firms relies on banks to finance their investments. There are four major contributions to the literature: First, although banks' leverage amplifies shocks, the endogenous response of leverage to shocks is an automatic stabilizer that improves the resilience of the economy. In particular, financial and labor market institutions are essential factors that determine the strength of this automatic stabilization. Second, there is a mix of publicly financed bank re-capitalization, dividend payout restrictions, and consumption taxes that stimulates a Pareto-improving rapid build-up of bank equity and accelerates economic recovery after a slump in the banking sector. Third, the model replicates typical patterns of financing over the business cycle: procyclical bank leverage, procyclical bank lending, and countercyclical bond financing. Fourth, the framework preserves its analytical tractability wherefore it can serve as a macro-banking module that can be easily integrated into more complex economic environments.JEL: E21, E32, F44, G21, G28

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Profit taxes and financing constraints

Keuschnigg

Ribi

2012

Int Tax Public Finance

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Without financing frictions, profit taxes reduce investment by their effect on the user cost of capital. With financing constraints, investment becomes sensitive to cash-flow. In this situation, even small taxes impose first order welfare losses, and ACE and cash-flow tax systems are no longer neutral. When banks become active and provide monitoring services in addition to finance, an ACE tax yields larger investment and welfare than an equal yield cash-flow tax.JEL-Classification: G38, H25. . We are particularly grateful for detailed suggestions and constructive comments by two anonymous referees and the editor, Eckhard Janeba.

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Financial Contracting Under Imperfect Enforcement

Cited by 33 publications

References 49 publications

Paying for Staying: Managerial Contracts and the Retention Motive

Paying for Staying: Managerial Contracts and the Retention Motive

Financial Intermediation, Capital Accumulation and Crisis Recovery

Profit taxes and financing constraints

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