Agency Costs, Net Worth and Endogenous. Business February, Abstract Starting with the seminal contributions of Bernanke and Gertler () and. Ben S. Bernanke and Mark Gertler. Most economists would . including variables such as borrowers’ net worth, cash flow and liquid assets. The second linkage. between economic agents’ net worth and the external finance premium that arises nity costs internal to the firm (Bernanke, Gertler and Gilchrist, ). The between borrowers and lenders increases agency costs.5 What types of . ; Elekdag et al., ; Gertler et al., ; Christiansen and Dib, ; Portes.

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Shocks that affect net worth as in a debt-deflation can initiate fluctuations.

Agency Costs, Net Worth, and Business Fluctuations

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As the access to this document is restricted, you may want to search for a different version of it. More about this item Statistics Access and download statistics. The mechanism is that higher borrower net worth reduces the agency costs of financing real capital investments.

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Agency Costs, Net Worth, and Business Fluctuations

Business upturns improve net worth, lower agency costs, and increase investment, which amplifies the upturn; vice versa, for downturns.

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