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Quality of Institutions, Credit Markets and Bankruptcy Author info | Abstract | Publisher info | Download info | Related research | Statistics Hainz, Christa
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The number of firm bankruptcies is surprisingly low in economies with poor institutions. We study a model of bank-firm relationship and show that the bank’s decision to liquidate bad firms has two opposing effects. First, the bank receives a payoff if a firm is liquidated. Second, it loses the rent from incumbent customers that is due to its informational advantage. We show that institutions must improve significantly in order to yield a stable equilibrium in which the optimal number of firms is liquidated. There is also a range where improving institutions may decrease the number of bad firms liquidated.
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Paper provided by Verein für Socialpolitik, Research Committee Development Economics in its series Proceedings of the German Development Economics Conference, Kiel 2005 with number
18.
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Date of creation: 2005Date of revision:
Handle: RePEc:zbw:gdec05:3491Contact details of provider: Web page: http://www.wiwi.uni-hannover.de/gif/ael/
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Keywords: Credit markets institutions bank competition information sharing bankruptcy relationship banking Other versions of this item:
Paper Christa Hainz, 2004.
"Quality of Institutions, Credit Markets and Bankruptcy ,"
CESifo Working Paper Series
CESifo Working Paper No. , CESifo GmbH.
[Downloadable!] Christa Hainz, 2005.
"Quality of Institutions, Credit Markets and Bankruptcy ,"
William Davidson Institute Working Papers Series
wp745, William Davidson Institute at the University of Michigan Stephen M. Ross Business School.
[Downloadable!] Hainz, Christa, 2004.
"Quality of Institutions, Credit Markets and Bankruptcy ,"
Discussion Papers in Economics
388, University of Munich, Department of Economics.
[Downloadable!] Find related papers by JEL classification: D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Mortgages G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation K10 - Law and Economics - - Basic Areas of Law - - - General (Constitutional Law)
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Zakolyukina Anastasia, 2006.
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