Creditor Contest In A World Without Bankruptcy
In this article a simple model of creditor behavior is developed to analyze the implications of a first-come, first-served rule in the case of investor bankruptcy. Creditor behavior is assumed to be a monitoring contest. Since the monitoring contest is very costly, interest rates are high. The model provides interesting implications for the design of bankruptcy rules. It also provides a motive for financial intermediation.
Volume (Year): 46 (2009)
Issue (Month): 3 ()
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