Walking Wounded or Living Dead? Making Banks Foreclose Bad Loans

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Max Bruche; Gerard Llobet;
(2010)

Due to limited liability, banks that are essentially insolvent may have incentives to roll over bad loans as a gamble for resurrection, even though it is socially inefficient to do so. This paper considers the problem of making such banks remove and/or foreclose bad loa... View more
  • References (2)

    Philippon, Thomas, and Vasiliki Skreta, 2010, Optimal interventions in markets with adverse selection, http://pages.stern.nyu.edu/~tphilipp/papers/PhilipponSkreta.pdf.

    Sekine, Toshitaka, Keiichiro Kobayashi, and Yumi Saita, 2003, Forebearance lending: The case of japanese rms, Monetary and Economic Studies pp. 69{92.

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