Specialization, Productivity, and Financing Constraints
نویسنده
چکیده
We analyze optimal financial contracts when the specificity of investments is endogenous. Specialization decreases the liquidation value of assets, but improves the asset’s long-term productivity. While the former is known to make financing more difficult, we show that the latter can ease financing constraints and increase financing capacity by improving an entrepreneur’s incentive to repay. The overall impact of specialization on the terms of financing depends on which effect is more important. Specialization decisions interact with the nature of investments, their timing, the need for outside financing, and an entrepreneur’s ability to commit to a level of specialization. (JEL G32, D23, G24)
منابع مشابه
Forthcoming , The Review of Financial Studies Specialization , Productivity and Financing Constraints ∗
We analyze optimal financial contracts when the specificity of investments is endogenous. Specialization decreases the liquidation value of assets, but it also improves the project’s long term productivity. While the first effect is known to make financing more difficult, we show that the second effect can ease financing constraints and increase financing capacity by improving an entrepreneur’s...
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