Internal versus External Financing : An Optimal Contracting Approach

  title={Internal versus External Financing : An Optimal Contracting Approach},
  author={ROMAN INDERSTand and Ulf Axelson and Mike Burkart and Doug Diamond and James Dow and Zsuzsanna Fluck and Paolo Fulghieri and Martin Hellwig and Christian Laux and Anthony D. Lynch and Alan Morrison and Lasse Dannemann Pedersen},
Westudyoptimal ¢nancial contracting for centralized and decentralized ¢rms. Under centralized contracting, headquarters raises funds onbehalf of multiple projects. Under decentralized contracting, each project raises funds separately on the external capital market.The bene¢t of centralization is that headquarters can use excess liquidity from high cash-£ow projects to buy continuation rights for low cash-£ow projects. The cost is that headquarters may pool cash £ows from several projects and… CONTINUE READING
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