CREDITOR CONTEST IN A WORLD WITHOUT BANKRUPTCY

Dieter Gathge
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Dieter Gathge: University of Zuerich, Institute for Accounting and Control

Revista Economica, 2009, vol. 46, issue 3, 85-96

Abstract: In this article a simple model of creditor behavior is developed to analyze the implications of a first-come, first-served rule in the case of investor bankruptcy. Creditor behavior is assumed to be a monitoring contest. Since the monitoring contest is very costly, interest rates are high. The model provides interesting implications for the design of bankruptcy rules. It also provides a motive for financial intermediation.

Keywords: Bankruptcy; Liquidation, Monitoring, Contest (search for similar items in EconPapers)
Date: 2009
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