Key points are not available for this paper at this time.
ABSTRACT This paper examines alternative contracting arrangements available to a firm seeking to finance an investment project. The authors consider the choice between loan contracts with covenants based on noisy indicators of the firm's financial health and loan contracts enforced by a monitoring specialist. In one interpretation, the specialist is a financial intermediary. The firm's choice is shown to depend upon the firm's credit rating, the accuracy of financial indicators of the firm's condition, the loss from premature liquidation of the firm's project, and the cost of monitoring.
Berlin et al. (Wed,) studied this question.
Synapse has enriched 5 closely related papers on similar clinical questions. Consider them for comparative context: