Topic: A Dynamic Model of Optimal Creditor Dispersion
Speaker: Hongda Zhong, Assistant Professor of Finance, London School of Economics and
Political Science
Date: April 13th (Wed.)
Time: 13:30pm-14:30pm
Location: Building
4, Room 101
Language: English
Abstract:
Borrowing
from multiple creditors exposes firms to liquidation risks due to coordination problems
among creditors, but it also improves the firms' repayment incentives, thereby
increasing pledgeability. Based on this trade-off, I develop a dynamic debt
rollover model to analyze the evolution of creditor dispersion. Consistent with
existing empirical findings, I find that firms optimally increase the number of
creditors when their performance declines, while in the cross-section,
high-growth firms can support more dispersed debt. Mechanisms that promote
ex-post efficient coordination lower firms' ex-ante pledgeability, thereby
exacerbating rollover risk. Frequent debt rollover diminishes the additional
pledgeability from having multiple creditors.
About the speaker:
Hongda
Zhong is the Assistant Professor of Finance at London School of Economics. He received
a Ph.D. in mathematics and a Ph.D. in Finance from University of Minnesota. Dr.
Zhong’s research interests are corporate finance, banking, optimal contract and
behavioral finance. He teaches alternative investment and principles of finance
in department of Finance. He is also a referee of Journal of Finance, Management Science and Journal of Development Economics.
