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Memory in Contracts: The Experience of the EBRD (1991-2003)

Lionel Artige () and Rosella Nicolini

UFAE and IAE Working Papers from Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC)

Abstract: The objective of this paper is to identify the role of memory in repeated contracts with moral hazard in financial intermediation. We use the database we have built containing the contracts signed by the European Bank for Reconstruction and Development EBRD between 1991 and 2003. Our framework is a standard setting of repeated moral hazard. After having controlled for the adverse selection component, we are able to prove that client reputation is the discrimination device according to which the bank fixes the amount of credit for the established clients. Our results unambiguously isolate the effect of memory in the bank's lending decisions.

Keywords: Financial Contracts; Incentives; Investment; Memory; Moral Hazard. (search for similar items in EconPapers)
JEL-codes: D21 D82 G21 L14 P21 (search for similar items in EconPapers)
Pages: 35
Date: 2008-02-01
New Economics Papers: this item is included in nep-bec and nep-cta
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http://pareto.uab.es/wp/2008/72408.pdf (application/pdf)

Related works:
Working Paper: Memory in Contracts: The Experience of the EBRD (1991-2003) (2010) Downloads
Working Paper: Memory in Contracts: The experience of the EBRD (1991-2003) (2008) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:aub:autbar:724.08

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