The way in which leverage and its expected dynamics impact on firm valuation is very
different from what is assumed by the traditional static capital structure framework. Recent …

Debt covenants are pervasive in debt contracts. To prevent the dilution of existing debt, most
creditors set covenants of a maximum debt (interest)-to-earnings ratio for borrowing firms. In …

I study leverage dynamics when the manager has discretion over the firm's debt policy but
cannot commit to it ex-ante. Private benefits of control reduce the manager's incentives to …

This paper develops a capital structure model with a financial covenant that sets an upper
limit on a firm's debt-earnings ratio. Shareholders reduce their debt level or default when this …

The static trade-off theory of capital structure is based on the unsatisfactory premise that
firms do not adjust debt over time. While alternative forms of commitment could be …

Financial covenants transfer control rights to lenders when borrowers' metrics breach pre-set
thresholds. Contingent control rights allow lenders to extract monetary concessions (eg, fees …

The way in which leverage and its expected dynamics impact on firm valuation is very
different from the assumptions of the traditional static capital structure framework. The …

In this chapter we extend in several ways the models developed in the previous chapters.
Section 7.1 presents a more general version of the model of imperfect competition we …

The thesis comprises three essays which reveal previously undetected costs and benefits of
Credit Default Swaps (CDSs). Chapter 2 empirically studies the effect of credit derivatives on …