Speaker: A/Prof Valdimir Valdimirov
Affiliation: University of Amsterdam
Zoom: https://uqz.zoom.us/j/82603079317
Abstract: Impact investments that require industry-wide change often stall because firms wait for peers to move first, creating a coordination trap. We develop a theory showing a built-in conflict that aggravates this trap: insuring firms against cash-flow risk unlocks investment but exacerbates agency problems. To mitigate this tension, impact investors can target a critical mass of firms with tailored financing contracts, catalyzing competitive financing for others. Unlike uniform taxes or subsidies, optimal impact financing is firm-specific, and its cost critically depends on which firms investors target. Subsidized impact financing is best directed to smaller, less efficient, high-opportunity-cost firms, while the most promising firms are best left to conventional investors.
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A seminar series designed specifically for economic theory researchers to network and collaborate.
