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Journal Article
Research spotlight: Ties that bind
Sablik, Timothy (2011-07)
Related links: https://www.richmondfed.org/-/media/richmondfedorg/publications/research/econ_focus/2011/q3/research_spotlight_weblinks.cfm
Econ Focus , Volume 15 , Issue 3Q , Pages 11

Working Paper
Outsourcing business service and the scope of local markets
Ono, Yukako (2001)
This paper examines outsourcing to test whether productivity-enhancing specialization is facilitated in bigger cities. First, the paper provides a theoretical model which shows that greater local demand for a given input promotes the entry of suppliers into a city; the increased number of suppliers then results in lower outsourcing prices and a higher use of outsourcing by final producers, therefore reducing the final producers' production costs. I then test the predictions of the model by examining manufacturing plants' practices of outsourcing business services, by using plant-level data ...
Working Paper Series , Paper WP-01-09

Conference Paper
Social capital and the cost of business loan contracting
Uzzi, Brian; Lancaster, Ryon (2001)
Proceedings , Paper 792

Working Paper
Courts and contractual innovation: a preliminary analysis
Leitner, Yaron; Berlin, Mitchell (2005)
The authors explore a model in which agents enter into a contract but are uncertain about how a judge will enforce it. The judge can consider a wide range of evidence, or instead, use a rule-based method of judgment that relies on limited information. The authors focus on the following tradeoff: Considering a wide range of evidence increases the likelihood of a correct ruling in the case at hand but undermines the formation of precedents that resolve legal uncertainty for subsequent agents. ; In a model of contractual innovation, they show that the use of evidence increases the likelihood of ...
Working Papers , Paper 05-27

Working Paper
Dynamic optimal insurance and lack of commitment
Karaivanov, Alexander K.; Martin, Fernando M. (2011)
This paper analyzes dynamic risk-sharing contracts between profit-maximizing insurers and risk-averse agents who face idiosyncratic income uncertainty and may self-insure through savings. We study Markov-perfect insurance contracts in which neither party can commit beyond the current period. We show that the limited commitment assumption on the insurer's side is only restrictive when he is endowed with a rate of return advantage and the agent has sufficiently large initial assets. In such a case, the consumption profile is distorted relative to the first-best. In a Markov-perfect equilibrium, ...
Working Papers , Paper 2011-029

Working Paper
Mortgages as Recursive Contracts
Marquis, Milton H.; Krainer, John (2004-09-01)
Mortgages are one-sided contracts under which the borrower may terminate the contract at any time, while the lender must commit to honoring the terms of the contract throughout its life. There are two aspects to this feature of the contract that are modeled in this paper. The first is that the borrower may choose between buying a house or renting. Given these alternatives, a contract between a household and a lender makes home ownership feasible, and provides insurance to the household against fluctuating rental payments. The second is that once in a contract, the household may terminate the ...
Working Paper Series , Paper 2003-03

Journal Article
A menu of options : a Richmond Fed economist says that giving financial institutions limited choice about how they are regulated may produce a more stable and efficient banking system
Foerster, Andrew T. (2005-07)
Econ Focus , Volume 9 , Issue Sum , Pages 26-29

Working Paper
Imperfect state verification and financial contracting
Haubrich, Joseph G. (1995)
An argument that in a costly state verification model of financial contracting, relaxing the assumption of perfect verification makes the measurement of information difficult.
Working Papers (Old Series) , Paper 9506

Working Paper
High-Yield Debt Covenants and Their Real Effects
Bräuning, Falk; Ivashina, Victoria; Ozdagli, Ali K. (2022-03-01)
High-yield debt, including leveraged loans, is characterized by incurrence financial covenants, or “cov-lite” provisions. Unlike, traditional, maintenance covenants, incurrence covenants preserve equity control rights but trigger pre-specified restrictions on the borrower’s actions once the covenant threshold is crossed. We show that restricted actions impose significant constraints on investments: Similar to the effects of the shift of control rights to creditors in traditional loans, the drop in investment under incurrence covenants is large and sudden. This evidence suggests a new ...
Working Papers , Paper 22-5

Conference Paper
The effect of creditor control rights on firm investment policy: evidence from private credit agreements
Sufi, Amir; Smith, David C.; Nini, Gregory P. (2007)
Proceedings , Paper 1050

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