The Threat of Exclusion and Implicit Contracting

• 成果类型: Article
• 署名作者: Brown, Martin; Serra-Garcia, Marta
• 署名单位: University of St Gallen; University of California System; University of California San Diego
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2016.2572
• 发表日期: 2017
• 页码: 4081-4100
• 关键词: economics; microeconomic behavior; behavior and behavioral decision making; finance; Corporate finance; implicit contracting

摘要

Implicit contracts can mitigate moral hazard in labor, credit, and product markets. The enforcement mechanism underlying an implicit contract is the threat of exclusion: the agent fears that he will lose future income if the principal breaks off the relationship. This threat may be very weak in environments where an agent can appropriate income-generating resources provided by the principal. For example, in credit markets with weak creditor protection, borrowers may be able to appropriate borrowed funds and generate investment income without requiring further loans. We examine implicit contracting in a lending experiment where the threat of exclusion is exogenously varied. We find that weak exclusion undermines implicit contracting: it leads to a more frequent breakdown of credit relationships as well as to smaller loans.