| Author(s): |
prof. Ing. Karel Janda M.A., Dr., Ph.D.,
|
| Type: |
IES Working Papers |
| Year: |
2006 |
| Number: |
24 |
| ISSN / ISBN: |
|
| Published in: |
IES WP 24/2006 |
| Publishing place: |
Prague |
| Keywords: |
Principal, Agent, Contracts, Credit, Adverse Selection, Moral Hazard |
| JEL codes: |
C72, D82, G21 |
| Suggested Citation: |
Janda, K., (2006). “ Lender and Borrower as Principal and Agent ” IES Working Paper 24/2006, IES FSV. Charles University |
| Grants: |
IES Research Framework Institutional task (2005-2011) Integration of the Czech economy into European union and its development
|
| Abstract: |
This paper provides a critical survey of some recent developments in the principal-agent approach to the relationship between lenders and borrowers. The costly state verification model of optimal debt contract is introduced and new results with respect to optimality of standard debt contracts in this model are discussed. Adverse selection in credit markets and its solution with a menu of screening contracts is described and the problems with collateral as a screening instrument are outlined. The dynamic relationship between the lender and borrower is introduced in a soft budget constraint model of default and bankruptcy decisions. Alternative assumptions about informational asymmetries in credit markets are presented as well. For all these topics a number of references from Czech and international economic literature is provided. |
| Downloadable: |
WP 2006_24_Janda
|
