Firms and financial institutions are best viewed as ongoing entities, whose project completion may require renewed injections of liquidity. This paper proposes a contract-theoretic framework integrating three dimensions of corporate financing and prudential regulation: (1) liquidity management, (b) risk management, and (c) capital structure. It concludes with a preliminary assessment of recent regulatory approaches to the treatment of market risk.
ASJC Scopus subject areas
- Economics and Econometrics