Debt enforcement and relational contracting
Brown, Martin (University of Saint Gallen)
Serra-García, Marta (Ludwig-Maximilians-Universität München)
Universitat Autònoma de Barcelona. Departament d'Empresa

Imprint:	Universitat Autònoma de Barcelona. Departament d'Economia de l'Empresa 2012
Description:	78 p.
Abstract:	We examine how third-party debt enforcement affects the emergence and performance ofrelational contracts in credit markets. We implement an experiment with finitely repeatedcredit relationships in which borrowers can default. In the weak enforcement treatmentdefaulting borrowers can keep their funds invested. In the strong enforcement treatmentdefaulting borrowers have to liquidate their investment. Under weak enforcement fewerrelationships emerge in which loans are extended and repaid. When such relationships doemerge they exhibit a lower credit volume than under strong enforcement. These findingssuggest that relational contracting in credit markets requires a minimum standard of thirdpartydebt enforcement.
Rights:	L'accés als continguts d'aquest document queda condicionat a l'acceptació de les condicions d'ús establertes per la següent llicència Creative Commons:
Language:	Anglès
Series:	Departament d'Economia de l'Empresa. Documents de treball
Series:	Document de treball (Universitat Autònoma de Barcelona. Departament d'Economia de l'Empresa) ; 12/1
Document:	Working paper
Subject:	Deute ; Crèdit

78 p, 420.7 KB

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Research literature > Working papers > Department of Business. Working papers