Repayment versus Investment Conditions and Exclusivity in Lending Contracts

Spiros Bougheas, Indraneel Dasgupta () and Oliver Morrissey

No 4604, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Lenders condition future loans on some index of past performance. Typically, banks condition future loans on repayments of earlier obligations whilst international organizations (official lenders) condition future loans on the implementation of some policy action (‘investment’). We build an agency model that accounts for these tendencies. The optimal conditionality contract depends on exclusivity – the likelihood that a borrower who has been denied funds from the original lenders can access funds from other lenders.

Keywords: exclusivity; long-term loans; repayment conditions; investment conditions (search for similar items in EconPapers)
JEL-codes: F34 G21 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2009-11
New Economics Papers: this item is included in nep-ban, nep-cfn and nep-cta
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Published - published in: Journal of Institutional and Theoretical Economics, 2011, 167 (2), 247-265.

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Journal Article: Repayment versus Investment Conditions and Exclusivity in Lending Contracts (2011)
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