research articles: The role of lender behavior in international project finance

Sumru Altug (), Sule Ozler () and Murat Usman ()
Additional contact information
Sule Ozler: UCLA, 2263 Bunche Hall, 405 Hilgard Avenue, Los Angeles, CA 90095-1447, USA

Economic Theory, 2002, vol. 19, issue 3, pages 571-598

Abstract: A sovereign borrower seeks to raise funds internationally to finance a fixed-size project, which no single lender can finance alone. Lenders cannot lend more than their endowments, which are private information. A coordination failure arises; therefore, some socially desirable projects may not be financed, even if ex post feasible. There are multiple equilibria, and a conflict exists between lenders about which equilibrium to coordinate on. When endowments are volatile, some lenders prefer an equilibrium in which the project is financed with probability $p < 1$, even if ex post feasible. The government eliminates such equilibria by offering a sufficiently high return, only if endowment volatility is small.

Keywords: International project finance; Lender behavior; Private information; Coordination problem; Subgame perfect equilibria. (search for similar items in EconPapers)
JEL-codes: F21 F34 (search for similar items in EconPapers)
Date: 2001-12-20
Note: Received: June 1, 1999; revised version: December 4, 2000

Downloads: (external link)
http://link.springer.de/link/service/journals/00199/papers/2019003/20190571.pdf (application/pdf)
Access to the full text of the articles in this series is restricted

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:spr:joecth:v:19:y:2002:i:3:p:571-598

Ordering information: This journal article can be ordered from
http://link.springer.de/orders.htm

Access Statistics for this article

Economic Theory is edited by Nichoals Yanneils

More articles in Economic Theory from Springer
Series data maintained by Christopher F Baum ().