Off-balance sheet funding, voluntary support and investment efficiency

Anatoli Segura, Jing Zeng

Veröffentlichungen: Beitrag in FachzeitschriftArtikelPeer Reviewed

Abstract

Off-balance sheet financing of an investment is covered by limited liability, whereas on-balance sheet financing creates unlimited liability towards the bank’s asset-in-place. Off-balance sheet funding thus gives the bank flexibility to voluntarily support debt repayments when the investment fails, which allows the bank to signal information about the quality of its future projects, improving investment efficiency. Yet, limited liability reduces the bank’s effort incentives. Off-balance sheet funding with voluntary support is optimal for activities that are rapidly growing or negatively correlated with existing assets. The model yields testable predictions on the relationship between off-balance sheet debt spreads and sponsors’ characteristics.
OriginalspracheEnglisch
Seiten (von - bis)90-107
Seitenumfang18
FachzeitschriftJournal of Financial Economics
Jahrgang137
Ausgabenummer1
DOIs
PublikationsstatusVeröffentlicht - Juli 2020

ÖFOS 2012

  • 502047 Volkswirtschaftstheorie
  • 502004 Bankbetriebslehre
  • 502009 Finanzwirtschaft

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