Agency Theory Approach to the Contracting between Lender and Borrower

Smluvní vztah mezi věřitelem a dlužníkem z hlediska přístupu teorie zastoupení

Karel Janda

Acta Oeconomica Pragensia, 2006, vol. 2006, issue 3, 34-47

Abstract: The paper provides an overview of several selected topics dealing with application of agency theory to the credit contracts. The costly state verification and costly punishment models of optimal debt contracts are introduced and compared with respect to their performance in the situation characterized by risk aversion. Adverse selection in credit markets and its solution with a menu of screening contracts is described and the use of collateral as a screening instrument is discussed. The dynamic relationship between the lender and borrower is introduced in a soft budget constraint model of default and bankruptcy decisions. Alternative assumptions about informational asymmetries in credit markets are presented as well. For all these topics a number of references from Czech and international economic literature is provided.

Keywords: principal; agent; contracts; credit; adverse selection; moral hazard (search for similar items in EconPapers)
JEL-codes: C72 D82 G21 (search for similar items in EconPapers)
Date: 2006
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Citations: View citations in EconPapers (5)

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DOI: 10.18267/j.aop.84

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