Optimal Debt with Unobservable Investments
研究当企业家投资和收入均不可观测时，外部投资者如何设计债务合同，发现清算威胁随违约程度增加而最优，且不同决策类型下清算威胁程度不同。
We study financial contracting when both an entrepreneur’s investment and the resulting revenue are unobservable to an outside investor. We show that a debt contract is always optimal; repayment is induced by a liquidation threat that increases with the extent of default. Moreover, when the entrepreneur’s decision concerns the scale of his project, a contract that minimizes liquidation losses is optimal. When the decision concerns managerial effort or project risk, however, it may be optimal to write a contract with a greater threat of liquidation, to induce the entrepreneur to exert more effort or to choose a less risky project.