Credit and efficiency in centralized and decentralized economies
AbstractThe authors study a credit model where, because of adverse selection, unprofitable projects may nevertheless be financed. Indeed, they may have to be financed even when shown to be low-quality if sunk costs have already been incurred. The authors show that credit decentralization offers a way for creditors to commit not to refinance such projects, thereby discouraging entrepreneurs from undertaking them initially. Thus, decentralization provides financial discipline. Nevertheless, the authors argue that it puts too high a premium on short-term returns. The model seems pertinent to two issues: 'soft budget constraint' problems in centralized economies, and differences between 'Anglo-Saxon' and 'German-Japanese' financing practices. Copyright 1995 by The Review of Economic Studies Limited.
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Bibliographic InfoPaper provided by ULB -- Universite Libre de Bruxelles in its series ULB Institutional Repository with number 2013/9603.
Date of creation: Oct 1995
Date of revision:
Publication status: Published in: The Review of Economic Studies (1995) v.62,p.541-555
Other versions of this item:
- Dewatripont, M & Maskin, E, 1995. "Credit and Efficiency in Centralized and Decentralized Economies," Review of Economic Studies, Wiley Blackwell, vol. 62(4), pages 541-55, October.
- Mathias Dewatripont & Eric Maskin, 2004. "Credit and efficiency in centralized and decentralized economies," ULB Institutional Repository 2013/9605, ULB -- Universite Libre de Bruxelles.
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by uncorrelated in ニュースの社会科学的な裏側 on 2013-03-10 18:00:00
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