Handbook of Financial Intermediation and Banking

CHAPTER 1 The Design of Debt Contracts

Paolo Fulghieri

University of North Carolina, Chapel Hill

Eitan Goldman

Indiana University, Bloomington

1. Introduction

2. Debt Contracts and Costly State Verification

2.1. Multiperiod Contracts

2.2. Stochastic Monitoring

3. Debt Contracts and the Allocation of Control Rights

4. Debt Contracts and the Provision of Incentives

5. Debt Contracts under Asymmetric Information

6. The Structure of Debt Contracts

6.1. Seniority

6.2. Maturity Structure

6.3. Collateral

6.4. The Number of Creditors

7. Concluding Remarks

References

We would like to thank Franklin Allen and Merih Sevilir for very helpful comments, and Hung-Chia (Scott) Hsu for excellent research assistance.

1. INTRODUCTION

From the seminal work ...