Agency Problems, Financial Contracting, and Predation (Classic Reprint)

Patrick Bolton, David Scharfstein

ISBN 10: 1332248551 / ISBN 13: 9781332248551

Published by Forgotten Books, 2018

About this Item

Print on Demand. This book explores the relationship between company finances and competition, proposing that common business practices may increase susceptibility to predatory behaviour. The author presents a new theory, known as 'predation theory'. This theory states that when a company secures its financial position through external sources, it is more likely to face predatory practices from competitors. The author argues that accessing external investment to offset operational costs, such as through venture capital or loans, creates a risk of 'predation' by rivals. This method of financing often requires adherence to strict performance targets and may force companies to accept unfavourable terms. As a result, competitors may deliberately take actions that reduce the company's profit margins, ultimately forcing it out of the market. The author also considers the concept of 'deep pockets' - when companies have ample financial resources - and argues that this can also lead to increased predation. The book contends that the common practice of using external financing to cover upfront costs could lead to a higher probability of underhanded tactics from competitors. It presents a sophisticated analysis of the interaction between financial strategy and aggressive market behaviour, highlighting the nuances and complexities present in the corporate world. The book's insights contribute to our understanding of business dynamics and the interplay between financial decisions and competitive advantage. This book is a reproduction of an important historical work, digitally reconstructed using state-of-the-art technology to preserve the original format. In rare cases, an imperfection in the original, such as a blemish or missing page, may be replicated in the book.

Seller Inventory # 9781332248551_0

Bibliographic Details

• Title: Agency Problems, Financial Contracting, and Predation (Classic Reprint)
• Publisher: Forgotten Books
• Publication Date: 2018
• Language: English
• ISBN 10: 1332248551
• ISBN 13: 9781332248551
• Binding: Paperback
• Condition: New
• Book Type: print-on-demand item
• Seller catalogs:
  • Business

About this title

Synopsis

Understand how competition and financing shape corporate risk and incentives.

This rigorous analysis examines how agency problems in financial contracting can invite predation in competitive markets. It builds a clear framework showing how the design of contracts between firms and investors influences both funding decisions and managers’ incentives, and it explains when predation helps or hurts in a multi-period setting. The work contrasts different ways predation can unfold and how observability of contracts changes strategic choices for both investors and rivals.

• How refinancing and internal funds affect a firm’s incentives and exit decisions over time
• How predatory actions by rivals can emerge and how contracts can deter or enable them
• Solutions that balance deterring predation with maintaining strong managerial incentives
• What contract observability means for real-world financing and corporate governance

Ideal for readers interested in finance, corporate strategy, and economic theory, exploring how capital structure and market competition interact in practice.

About the Author

Patrick Bolton is John H. Scully Professor of Finance at Princeton University and managing editor of "The Journal of the European Economic Association".