Multiple lenders, strategic default and debt covenants - HAL Accéder directement au contenu
Article dans une revue American Economic Journal: Microeconomics Année : 2019

Multiple lenders, strategic default and debt covenants

Résumé

We study competition in capital markets subject to moral hazard when investors cannot prevent side trading. Perfect competition is impeded by entrepreneurs’ threat to borrow excessively from multiple lenders and to shirk. As a consequence, investors earn positive rents at equilibrium. We then analyze how investors’ ability to design financial contracts with covenants deals with this counterparty externality. We show that enlarging investors’ contracting opportunities generates a severe market failure: with covenants, market equilibria are indeterminate and Pareto ranked. Market outcomes are then determined by designing specific financial institutions. Information sharing systems restore efficiency but leave a positive rent to investors. A mechanism of investors-financed subsidies to entrepreneurs mitigates the threat of default and sustains the competitive allocation.
Loading...
Fichier non déposé

Dates et versions

halshs-03342939, version 1 (13-09-2021)

Identifiants

Citer

Andrea Attar, Catherine Casamatta, Arnold Chassagnon, Jean-Paul Décamps. Multiple lenders, strategic default and debt covenants. American Economic Journal: Microeconomics, 2019, 11 (2), pp.98-130. ⟨10.2139/ssrn.2201499⟩. ⟨halshs-03342939⟩
32 Consultations
0 Téléchargements
Dernière date de mise à jour le 16/06/2024
comment ces indicateurs sont-ils produits

Altmetric

Partager

Gmail Facebook Twitter LinkedIn Plus