IDEAS home Printed from https://ideas.repec.org/a/ebl/ecbull/eb-03g30001.html

The Influence of Large Creditors on Creditor Coordination

Author

Listed:
  • Koichi Takeda

    (Faculty of Economics, Hosei University)

Abstract

This paper examines the influence of large creditors in determining the likelihood of debt defaults due to creditor coordination failure. We develop a model in which a large creditor and a group of small creditors independently decide, based on private signals of fundamentals, whether to foreclose on a loan. In the absence of common knowledge of fundamentals, the incidence of failure is uniquely determined. Comparative statics on the unique equilibrium provides simple characterization of the role of large creditors. Our results show that the smaller the large creditor is, the more vulnerable the debtor is to premature foreclosure. We also find that information of relatively high precision available to the large creditor reduces the probability of failure.

Suggested Citation

  • Koichi Takeda, 2003. "The Influence of Large Creditors on Creditor Coordination," Economics Bulletin, AccessEcon, vol. 7(6), pages 1-11.
    • Handle: RePEc:ebl:ecbull:eb-03g30001
    as

    Download full text from publisher

    File URL: http://www.accessecon.com/pubs/EB/2003/Volume7/EB-03G30001A.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Takeda, Fumiko, 2004. "A twin crisis model with incomplete information," Journal of the Japanese and International Economies, Elsevier, vol. 18(1), pages 38-56, March.
    2. Giancarlo Corsetti & Paolo Pesenti & Nouriel Roubini, 2002. "The Role of Large Players in Currency Crises," NBER Chapters, in: Preventing Currency Crises in Emerging Markets, pages 197-268, National Bureau of Economic Research, Inc.
    3. Douglas W. Diamond & Philip H. Dybvig, 2000. "Bank runs, deposit insurance, and liquidity," Quarterly Review, Federal Reserve Bank of Minneapolis, vol. 24(Win), pages 14-23.
    4. Frankel, David M. & Morris, Stephen & Pauzner, Ady, 2003. "Equilibrium selection in global games with strategic complementarities," Journal of Economic Theory, Elsevier, vol. 108(1), pages 1-44, January.
    5. Milgrom, Paul & Roberts, John, 1990. "Rationalizability, Learning, and Equilibrium in Games with Strategic Complementarities," Econometrica, Econometric Society, vol. 58(6), pages 1255-1277, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Flavio Bazzana & Marco Palmieri, 2012. "How to increase the efficiency of bond covenants: a proposal for the Italian corporate market," European Journal of Law and Economics, Springer, vol. 34(2), pages 327-346, October.
    2. Manfred Stadler & Tobias Schuele, 2005. "Signalling Effects of a Large Player in a Global Game of Creditor Coordination," Economics Bulletin, AccessEcon, vol. 4(12), pages 1-7.
    3. repec:ebl:ecbull:v:4:y:2005:i:12:p:1-7 is not listed on IDEAS
    4. Oh, Frederick Dongchuhl & Park, Junghum, 2023. "A large creditor in contagious liquidity crises," Journal of Banking & Finance, Elsevier, vol. 146(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. repec:ebl:ecbull:v:7:y:2003:i:6:p:1-11 is not listed on IDEAS
    2. Piersanti, Giovanni, 2012. "The Macroeconomic Theory of Exchange Rate Crises," OUP Catalogue, Oxford University Press, number 9780199653126.
    3. Stephen Morris & Hyun Song Shin, 2000. "Global Games: Theory and Applications," Cowles Foundation Discussion Papers 1275, Cowles Foundation for Research in Economics, Yale University.
    4. Vives, Xavier & Vravosinos, Orestis, 2024. "Strategic complementarity in games," Journal of Mathematical Economics, Elsevier, vol. 113(C).
    5. Zimper, Alexander, 2004. "Dominance-Solvable Lattice Games," Sonderforschungsbereich 504 Publications 04-18, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
    6. Frankel, David M., 2015. "Insuring customers of a unionized firm against loss of network benefits," ISU General Staff Papers 201502030800001036, Iowa State University, Department of Economics.
    7. Li, Fei & Song, Yangbo & Zhao, Mofei, 2023. "Global manipulation by local obfuscation," Journal of Economic Theory, Elsevier, vol. 207(C).
    8. Itay Goldstein, 2005. "Strategic Complementarities and the Twin Crises," Economic Journal, Royal Economic Society, vol. 115(503), pages 368-390, April.
    9. Chanelle Duley & Prasanna Gai, 2020. "When the penny doesn't drop - Macroeconomic tail risk and currency crises," National Institute of Economic and Social Research (NIESR) Discussion Papers 520, National Institute of Economic and Social Research.
    10. , & , & ,, 2008. "Monotone methods for equilibrium selection under perfect foresight dynamics," Theoretical Economics, Econometric Society, vol. 3(2), June.
    11. Chassang, Sylvain, 2008. "Uniform selection in global games," Journal of Economic Theory, Elsevier, vol. 139(1), pages 222-241, March.
    12. Dubey, Pradeep & Haimanko, Ori & Zapechelnyuk, Andriy, 2006. "Strategic complements and substitutes, and potential games," Games and Economic Behavior, Elsevier, vol. 54(1), pages 77-94, January.
    13. Heinemann, Frank & Illing, Gerhard, 2002. "Speculative attacks: unique equilibrium and transparency," Journal of International Economics, Elsevier, vol. 58(2), pages 429-450, December.
    14. Markus K. Brunnermeier & Martin Oehmke, 2014. "Predatory Short Selling," Review of Finance, European Finance Association, vol. 18(6), pages 2153-2195.
    15. Brunnermeier, Markus & Abadi, Joseph, 2018. "Blockchain Economics," CEPR Discussion Papers 13420, C.E.P.R. Discussion Papers.
    16. Anna Kerkhof & Johannes Münster, 2023. "Strategic Complementarities in a Model of Commercial Media Bias," ECONtribute Discussion Papers Series 261, University of Bonn and University of Cologne, Germany.
    17. Drozd, Lukasz A. & Serrano-Padial, Ricardo, 2018. "Financial contracting with enforcement externalities," Journal of Economic Theory, Elsevier, vol. 178(C), pages 153-189.
    18. Kováč, Eugen & Steiner, Jakub, 2013. "Reversibility in dynamic coordination problems," Games and Economic Behavior, Elsevier, vol. 77(1), pages 298-320.
    19. Koehler-Geib, Friederike Norma, 2008. "The Effect of Uncertainty on the Occurrence and Spread of Financial Crises," Munich Dissertations in Economics 8067, University of Munich, Department of Economics.
    20. Morris, Stephen & Shin, Hyun Song, 2004. "Coordination risk and the price of debt," European Economic Review, Elsevier, vol. 48(1), pages 133-153, February.
    21. Ahnert, Toni & Anand, Kartik & Gai, Prasanna & Chapman, James, 2015. "Safe, or not safe? Covered bonds and Bank Fragility," VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 112875, Verein für Socialpolitik / German Economic Association.

    More about this item

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ebl:ecbull:eb-03g30001. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: John P. Conley (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.