We offer a unified framework to analyze the determination of employment, employee effort, wages, profit sharing and capital structure when firms face stochastic revenue shocks. We apply a generalized Nash bargaining solution, which extends the wage bargaining literature by incorporating efficiency wage considerations, profit sharing and capital structure. The profit sharing instrument is demonstrated to [...]
A Framework for Valuing Corporate Securities
We suggest a methodology for valuing corporate securities that allows the straightforward derivation of closed form solutions for complex capital structure scenarios. The tractability of the approach stems from its modularity – we provide a number of intuitive building blocks that are sufficient for valuation in most typical situations. A further advantage of our approach [...]