0430014 - NHÚ 2015 US eng C - Conference Paper (international conference)
Boháček, Radim
Leverage bounds with default and asymmetric information.
2014 North American Summer Meeting of the Econometric Society. 2014.
[2014 North American Summer Meeting of the Econometric Society. Minneapolis (US), 19.06.2014-22.06.2014]
R&D Projects: GA ČR GA402/09/1340
Institutional support: RVO:67985998
Keywords : financial markets and the macroeconomy * asymmetric and private information * occupational choice
Subject RIV: AH - Economics
Result website:
http://editorialexpress.com/conference/NASM2014/program/NASM2014.html

This paper analyzes productivity and welfare losses from capital misallocation in a general equilibrium model of occupational choice and financial intermediation. It studies the effects of risk sharing with default and asymmetric information on the optimal allocation of resources and derives endogenous leverage bounds. Default, moral hazard and adverse selection have large impact on entrepreneurs’ entry and firm-size decisions due to endogenous collateral requirements from incentive compatible allocations. In the full information, risk-sharing economy the downpayment margin is around 15%, while it increases to 25% in the case of adverse selection and to 35% in the case of moral hazard. When default is also present, the margin is above 50% or higher, depending on the recovery rate. Business cycle properties of default and information frictions are also studied.

Permanent Link: http://hdl.handle.net/11104/0241507