Exclusive contracts and the institution of bankruptcy

Journal Article (Journal Article)

The paper studies the institution of bankruptcy when exclusive contracts cannot be enforced ex ante, e.g., a bank cannot monitor whether the borrower enters into contracts with other creditors. The institution of bankruptcy enables the bank to enforce its claim to any funds that the borrower has above a fixed "bankruptcy protection" level. Bankruptcy improves on non-exclusive contractual relationships but is not a perfect substitute for exclusivity ex ante. We characterize the effect of bankruptcy provisions on the equilibrium contracts which borrowers use to raise financing. © Springer-Verlag 2006.

Full Text

Duke Authors

Cited Authors

  • Bisin, A; Rampini, AA

Published Date

  • February 1, 2006

Published In

Volume / Issue

  • 27 / 2

Start / End Page

  • 277 - 304

International Standard Serial Number (ISSN)

  • 0938-2259

Digital Object Identifier (DOI)

  • 10.1007/s00199-005-0604-y

Citation Source

  • Scopus