The Influence of Large Creditors on Creditor Coordination

Koichi Takeda ()

Economics Bulletin, 2003, vol. 7, issue 6, pages 1-11

Abstract: This paper examines the influence of large creditors in determining the likelihood of debt defaults due to creditor coordination failure. We develop a model in which a large creditor and a group of small creditors independently decide, based on private signals of fundamentals, whether to foreclose on a loan. In the absence of common knowledge of fundamentals, the incidence of failure is uniquely determined. Comparative statics on the unique equilibrium provides simple characterization of the role of large creditors. Our results show that the smaller the large creditor is, the more vulnerable the debtor is to premature foreclosure. We also find that information of relatively high precision available to the large creditor reduces the probability of failure.

Keywords: Creditor coordination; Debt defaults; Global games; Incomplete information; Large creditors (search for similar items in EconPapers)
JEL-codes: G3 D8 (search for similar items in EconPapers)
Date: 2003-10-13
View list of references View citations in EconPapers

Downloads: (external link)
http://www.economicsbulletin.com/2003/volume7/EB-03G30001A.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:ebl:ecbull:v:7:y:2003:i:6:p:1-11

Access Statistics for this article

More articles in Economics Bulletin from Economics Bulletin
Address: Economics Bulletin, Department of Economics, 414 Calhoun Hall, Vanderbilt University, Nashville TN 37235, USA
Series data maintained by John Conley ().