Upcoming Webinars

Dilutive Financing

Hanjoon Ryu

September 10, 2026
Seminar: 12:00 pm - 1:00 pm ET (9am PT, 5pm BST, 6pm CEST).
Virtual Coffee Break: 1:00 pm - 1:30 pm ET

Abstract: This paper presents a dynamic model of firm financing where firms use financial slack to reduce rent extraction by financiers with bargaining power. Financing is lumpy because it is optimal to bargain infrequently. Moreover, firms may finance ‘early’ before exhausting internal funds to bargain when their outside options are better. Financing rents are thus endogenous to firms’ dynamic financing strategy. Firms with good financing alternatives raise financing early to reduce rents, whereas firms lacking such alternatives raise financing after exhausting funds to avoid frequently paying endogenously large rents. Investment irreversibility increases financing rents, and disproportionately so for less productive firms.