A Theory of Debt Based on the Inalienability of Human Capital / Oliver Hart, John Moore.

Format:

Book

Author/Creator:

Hart, Oliver.

Contributor:

National Bureau of Economic Research.

Moore, John.

Series:

Working Paper Series (National Bureau of Economic Research) no. w3906.

NBER working paper series no. w3906

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1991.

Summary:

Consider an entrepreneur who needs to raise funds from an investor, but cannot commit not to withdraw his human capital from the project. The possibility of a default or quit puts an upper bound on the total future indebtedness from the entrepreneur to the investor at any date. We characterize the optimal repayment path and show how it is affected both by the maturity structure of the project return stream and by the durability and specificity of project assets. Our results are consistent with the conventional wisdom about what determines the maturity structure of (long-term) debt contracts.

Notes:

Print version record

November 1991.