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Beneficial "firm runs"

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Author Info
Stanley D. Longhofer
Abstract

The author argues that runs, which are generally considered undesirable, also have a beneficial effect--improving lenders' monitoring incentives. Lenders' ability to run on the firm helps control its moral hazard problem, while the first-come, first-served aspect of asset distribution keeps lenders from wanting to free ride on the monitoring efforts of others.

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File URL: http://www.clevelandfed.org/research/review/1998/98-q1-longhofer.pdf
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Publisher Info
Article provided by Federal Reserve Bank of Cleveland in its journal Economic Review.

Volume (Year): (1998)
Issue (Month): Q I ()
Pages: 21-29
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:fip:fedcer:y:1998:i:qi:p:21-29:n:v.34no.1

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Related research
Keywords: Bankruptcy ; Bank loans;

References listed on IDEAS
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  1. Philippe Aghion & Oliver Hart & John Moore, 1992. "The Economics of Bankruptcy Reform," CEP Discussion Papers dp0093, Centre for Economic Performance, LSE.
  2. Michelle J. White, 1980. "Public Policy Toward Bankruptcy: Me-First and Other Priority Rules," Bell Journal of Economics, The RAND Corporation, vol. 11(2), pages 550-564, Autumn. [Downloadable!] (restricted)
  3. Bolton, Patrick & Scharfstein, David S, 1996. "Optimal Debt Structure and the Number of Creditors," Journal of Political Economy, University of Chicago Press, vol. 104(1), pages 1-25, February. [Downloadable!] (restricted)
  4. Calomiris, Charles W & Kahn, Charles M, 1991. "The Role of Demandable Debt in Structuring Optimal Banking Arrangements," American Economic Review, American Economic Association, vol. 81(3), pages 497-513, June. [Downloadable!] (restricted)
  5. Rajan, Raghuram & Winton, Andrew, 1995. " Covenants and Collateral as Incentives to Monitor," Journal of Finance, American Finance Association, vol. 50(4), pages 1113-46, September. [Downloadable!] (restricted)
  6. Robert Gertner & David Scharfstein, 1991. "A Theory of Workouts and the Effects of Reorganization Law," NBER Technical Working Papers 0103, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  7. Aghion, Philippe & Hart, Oliver & Moore, John, 1992. "The Economics of Bankruptcy Reform," Journal of Law, Economics and Organization, Oxford University Press, vol. 8(3), pages 523-46, October.
    Other versions:
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This page was last updated on 2009-12-6.


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