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Abstract
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 gets a payoff if a firm is liquidated. Second, it loses the rent from incumbent customers 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. However, in a particular range, improving institutions may even decrease the number of bad firms liquidated.
| Dokumententyp: | Paper |
|---|---|
| Keywords: | Credit markets, institutions, bank competition, information sharing, bankruptcy, relationship banking |
| Fakultät: | Volkswirtschaft
Volkswirtschaft > Munich Discussion Papers in Economics Volkswirtschaft > Lehrstühle > Seminar für Komparative Wirtschaftsforschung |
| Themengebiete: | 300 Sozialwissenschaften > 300 Sozialwissenschaft, Soziologie
300 Sozialwissenschaften > 330 Wirtschaft |
| JEL Classification: | G21, G33, K10, D82 |
| URN: | urn:nbn:de:bvb:19-epub-388-5 |
| Sprache: | Englisch |
| Dokumenten ID: | 388 |
| Datum der Veröffentlichung auf Open Access LMU: | 13. Apr. 2005 |
| Letzte Änderungen: | 08. Nov. 2020, 06:37 |
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