Debt Contracts with Partial Commitment

• 成果类型: Article
• 署名作者: Kovrijnykh, Natalia
• 署名单位: Arizona State University; Arizona State University-Tempe
• 刊物名称: AMERICAN ECONOMIC REVIEW
• ISSN/ISSBN: 0002-8282
• DOI: 10.1257/aer.103.7.2848
• 发表日期: 2013
• 页码: 2848-2874
• 关键词: Relationship banking; Sovereign debt; moral hazard; long-term; RISK; INVESTMENT; RENEGOTIATION; ENFORCEMENT; decisions; liquidity

摘要

This paper analyzes a dynamic lending relationship where the borrower cannot be forced to make repayments, and the lender offers long-term contracts that are imperfectly enforced and repeatedly renegotiated. No commitment and full commitment by the lender are special cases of this model where the probability of enforcement equals zero and one, respectively. I show that an increase in the degree of enforcement can lower social welfare. Furthermore, properties of equilibrium investment dynamics with partial commitment drastically differ from those with full and no commitment. In particular, investment is positively related to cash flow, consistent with empirical findings.