Optimal Lending Contracts with Long Run Borrowing Constraints (Li M.)

Bank Lending Information Asymmetry and Transparency

Abstract This paper discusses two ways to amend the optimal lending contract under asymmetric information studied in Clementi and Hopenhayn (2006) to change its long-run implications so that firm growth and exit driven by borrowing constraints exist in the long run. One way assumes that the entrepreneur has a lower discount factor than the bank, and the other assumes to the bank has limited commitment. The optimal lending contracts under each variation closely resemble each other.
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Libref/ Li M. (2009) “Optimal Lending Contracts with Long Run Borrowing Constraints”, Department of Economics of the University of Melbourne Research Paper No. 1065, pp. 1-35
© Программирование — Александр Красильников, 2008
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