ICEF/LFE Research Seminar by Hongda Zhong (LSE)

On Thursday, September 21 at 4.40 pm, room 3211 (Shabolovka str. 26) ICEF and LFE held the Research Seminar.
Speaker: Hongda Zhong (LSE)
Theme: "A Theory of Multi-Period Debt Structure" joint with Chong Huang and Martin Oehmke

Abstract: We develop a model of multi-period debt structure. A simple trade-off between the termination threat required to make repayments incentive compatible and the desire to avoid early liquidation determines the number of repayments, their timing, and repayment amounts. For mature firms with risky cash flows, frequent repayments maximize pledgeable income—for example, by rolling over short-term debt. In contrast, for firms with cash-flow growth or significant risk-free cash flows, adding risky repayments can decrease pledgeable income. In some cases, a single risky bullet repayment maximizes pledgeable income, effectively a long-term debt contract.  

 

---

Forthcoming seminars

Past seminar