Monitoring, Liquidation, and Security Design

Rafael Repullo and Javier Suarez

Working Papers from Banca Italia - Servizio di Studi

Abstract: By identifying the possibility of imposing a credible threat of liquidation as the key role of informed (bank) finance in a moral hazard context, and showing how credibility fails when liquidity values are low, this paper identifies the circumstances under which a mixture of informed and uninformed finance is optimal and explains why bank debt is typically secured, senior, and tightly held.

Keywords: BANKS; FINANCIAL MARKET; MORAL HAZARD (search for similar items in EconPapers)
JEL-codes: G20 G21 (search for similar items in EconPapers)
Pages: 44 pages
Date: 1996
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Monitoring, Liquidation, and Security Design (1998)
Working Paper: Monitoring, Liquidation, and Security Design (1995)
Working Paper: Monitoring,Liquidation,and Security Design (1995)
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Persistent link: https://EconPapers.repec.org/RePEc:fth:banita:273

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