Design of financial contracts and organizations

The topic of my thesis is the optimal way of structuring contracts and projects for the firm with multiple investment opportunities. The main question that I address is how contracts and organizations should be designed so as to maximize the firm value by countering incentive or information problems that can arise in such a setting. Should the projects be kept together in a unitary structure or should the financing of the projects be channeled through a set of the subsidiaries? Should the project be undertaken inside the firm or in a joint partnership with another firm?; I study in detail two of the innovative organization forms, namely, project financing and corporate alliance. First, I analyze the optimal structure for arranging debt financing in the setting where the firm possesses private information about a set of investment opportunities. In the dynamic asymmetric information model I investigate the role of the project finance in providing means of financial flexibility to the firm in financing the future projects. I derive implications for the optimal choice of debt instrument under different structures of asymmetric information.; A study of effects of organization of investment on the firm value would not be complete without the discussion of how firms interact. I study a form of undertaking investment project where two otherwise independent firms undertake the project by a means of contractual alliance. I provide a theoretical framework for analyzing the structure of such joint projects under moral hazard and asymmetric information.