| My dissertation comprises of three essays on dynamic analyses of corporate finance and banking. Chapter 1 develops an optimal contract problem for a two-period moral hazard problem which determines project and debt maturities. Project and debt maturities are determined by an optimal contract for a two-period moral hazard problem. When the agency problem associated with the long-term project is severe, the investor prefers the short project maturity and the optimal project maturity is implemented by a set of history dependent dividend payout and liquidation schemes. The appropriate debt maturity structure can approximate this optimal contract. The model generates two results that are consistent with empirical findings: (i) a positive correlation between a firm's project maturity and debt maturity, and (ii) a negative correlation between a firm's degree of managerial discretion and debt maturity. Chapter 2 develops a dynamic equilibrium model of the banking industry that takes into account for firm and bank heterogeneity and the market for new and existing loans with a full description for the demand and supply of bank loans. The consequences of various shocks to the economy are considered through the equilibrium analysis. The model predicts that as the degree of interbank competition becomes higher, the number of loan relations for each firm becomes smaller. The model is also consistent with several empirical regularities regarding the loan structure. Chapter 3 studies the determinants of a firm's bank financing structure. In addition to the number of banks, which has been the exclusive focus of the existing literature, the asymmetry of each bank's loan share is examined. By using a unique data set for Japanese bank loan market, we document the asymmetric and somewhat persistent loan share structure, and establish its determinants. It is confirmed that bank loan structures systematically depend on the characteristics of firms, banks, and matches. The persistency is also examined through a duration analysis. The results support the existence of relation-specific capital discussed in the theoretical literature. |
