• Seminari: «Non-exclusive Liquidity Provisions»

  • Start: Friday, 05 March 12:00
    End: Friday, 05 March 14:00
  • Universitat de les Illes Balears, Carretera de Valldemossa, Palma, Espanya
  • A les 12 hores.

    En línia.

    A càrrec de Fabio Feriozzi (IE, Finance).

    This paper studies the effect of non-exclusive liquidity provisions in the [Holmström Tirole 98] model. When a firm exposed to liquidity risk exclusively deals with a single investor, the latter provides both long-term funds and a committed liquidity facility, leaving the former with an incentive stake that guarantees effort provision. If the firm can negotiate ex post with a second investor, the initial contract must also ward off possible abuses of the liquidity facility. We show that non-exclusive contracting improves the firm's liquidity position but severely hampers incentives and limits the access to long-term funds. As a result, the firm is less profitable but more difficult to liquidate, and possibly turns into a zombie.