Determinants of strategic behavior: Evidence from a foreclosure moratorium

Nikolaos Artavanis and Ioannis Spyridopoulos

Journal of Financial Intermediation, 2023, vol. 56, issue C

Abstract: We study mortgagors’ attitudes toward strategic behavior following a foreclosure moratorium in Greece. To identify strategic delinquencies, we exploit the concurrent introduction of a debt discharge process that provides generous debt relief for borrowers who prove their inability to pay but entails high costs for those who can afford their mortgages. This setting creates distinct optimal strategies for delinquent borrowers: non-strategic mortgagors participate in the debt discharge process, whereas strategic borrowers use the moratorium to protect their homes. Our results indicate that borrower sophistication, aversion to moral hazard, banking relationships, and preference for liquidity play an important role in strategic behavior.

Keywords: Strategic behavior; Credit market interventions; Moratorium; Moral hazard (search for similar items in EconPapers)
JEL-codes: D10 G21 K35 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinin:v:56:y:2023:i:c:s1042957323000426

DOI: 10.1016/j.jfi.2023.101059

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