Title: Collateral,Credit Contract and the Behavior of Borrowers
Abstract: Based on the theory of information economics,a credit market game model under asymmetric information was established.By using the model,the role of collateral in an asymmetric credit market is examined.Both ex ante adverse selection and ex post moral hazard are considered.The main point is that the use of collateral often efficiently resolves moral hazard and adverse selection problems under a certain condition.By means of self-selection mechanism of borrowers, separating contracts may be useful devices to decrease credit risk of bank loans.Yet the realistic restrains in our country partially counteract the effects of collateral.
Publication Year: 2006
Publication Date: 2006-01-01
Language: en
Type: article
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