The role of long-term contracting in business lending / by Phoebe Tian.: FB3-5/2024-2E-PDF
"This paper examines inefficiencies arising from a lack of long-term contracting in small business lending in China. I develop and estimate a dynamic model where firms repeatedly interact with the same lender. All loans are short-term. Collateral can be used to deter a strategic default by a firm, but the lender cannot recover the full value of the collateral in the case of a default. The endogenous contract terms—including interest rates, loan size and collateral—reflect a firm’s probability of default in equilibrium. Learning drives the dynamics of contract terms because a firm’s profitability type is unknown. Long-term contracts improve welfare mainly by mitigating the incentives for a firm to default"--Abstract, page ii.
Permanent link to this Catalogue record:
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| Title | The role of long-term contracting in business lending / by Phoebe Tian. |
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| Publication type | Monograph - View Master Record |
| Language | [English] |
| Format | Digital text |
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| Description | 1 online resource (ii, 68 pages) : graphs. |
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