Search Results
Journal Article
Dancing with wolves: syndicated loans and the economics of multiple lenders
A firm?s passage from borrowing from a single lender to using multiple lenders is often viewed as an inevitable progression in the life of a firm. While there is a strong element of truth in this view, it is also incomplete. The underlying economics of moving from one lender to many involves more than simply asking whether the firm?s revenues are large enough to cover the costs of adding more lenders or of acquiring a public debt rating. The U.S. syndicated loan market provides a useful laboratory for exploring the economics of multiple lenders. In ?Dancing with Wolves: Syndicated Loans and ...
Working Paper
Financial intermediation as vertical integration
Working Paper
Debt covenants and renegotiation
Working Paper
Intermediation and vertical integration
This paper views financial intermediaries as vertically integrated firms. The authors explore how competitive conditions in retail and wholesale funding markets affect the incentive for (upstream) originators and (downstream) fund managers to integrate. The underlying tradeoff in our model is driven by the choice between the production of an illiquid but high yielding loan and a liquid but relatively low yielding bond. The authors find that greater homogeneity among savers has two effects, both of which tend to increase the incentive to form integrated intermediaries. Greater homogeneity both ...
Journal Article
New perspectives on consumer behavior in credit and payments markets
Mitchell Berlin summarizes new research on household finance presented at a joint conference sponsored by the Federal Reserve Bank of Philadelphia's Research Department and Payment Cards Center.
Working Paper
Public versus private debt: confidentiality, control, and product markets
The authors examine a firm's choice between public and private debt in a model where the firm's financing source affects its product market behavior. Two effects are examined. When frims' risk-taking decisions are strategic substitutes, debt financing leads to excessively risky product market strategies (as in Brander and Lewis' (1986) Cournot oligopoly with debt). Lender control through restrictive covenants--which is characteristic of private debt--can commit the firm to reduce aggressiveness in product markets and increase expected profits. This is the monitoring effect. On the other hand, ...
Working Paper
Financing, commitment and entry deterrence
Working Paper
Optimal financial contracts for large investors: the role of lender liability
This paper explores the optimal financial contract for a large investor with potential control over a firm's investment decisions. The authors show that an optimally designed menu of claims for a large investor will include features resembling a U.S. version of lender liability doctrine, equitable subordination. This doctrine permits a firm's claimants to seek to subordinate a controlling investor's financial claim in bankruptcy court, but only under well-specified conditions. Specifically, the authors show that this doctrine allows a firm to strike an efficient balance between two concerns: ...
Working Paper
Credit card rates and consumer search