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Peter DeMarzo is the Mizuho Financial Group Professor of Finance and Faculty Director for Educational Technology, and former Senior Associate Dean for the GSB. He has published research on corporate investment and financing, asset securitization, financial contracting, and market regulation. Recent work has examined the optimal design of securities, compensation mechanisms, regulation of insider trading and broker-dealers, bank capital regulation, and the influence of information asymmetries on corporate disclosures and investment. He is co-author of Corporate Finance and Fundamentals of Corporate Finance (Pearson Prentice Hall 2012). He has served as president of the Western Finance Association and director of the American Finance Association. He is a Research Associate of the National Bureau of Economic Research. Before joining Stanford, he was on the faculty of U.C. Berkeley’s Haas School of Business, Northwestern University’s Kellogg Graduate School of Management, and a National Fellow at the Hoover Institution. DeMarzo received a Ph.D. in Economics in 1989 and M.S. in Operations Research in 1985 from Stanford University, and a B.A. in Cognitive Science and Applied Mathematics in 1984 from U.C. San Diego. His research has received awards including the Barclays Global Investors/Michael Brennan best paper award from the Review of Financial Studies, and the Western Finance Association Corporate Finance Award. He won the Sloan Teaching Excellence award in 2004 and 2006, and the Cheit Outstanding Teaching Award in 1998. He currently teaches MBA and PhD courses in Corporate Finance and Financial Modeling.

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Debt Overhang and Capital Regulation

Paper Conference paper | | Apr 2012

We analyze shareholders’ incentives to change the leverage of a firm that has already borrowed substantially. As a result of debt overhang, shareholders have incentives to resist reductions in leverage that make the remaining debt safer.