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Title: 

Exclusive Contracts and the Institution of Bankruptcy

Authors: Bisin, Alberto
Rampini, Adriano A.
Keywords: Bankruptcy;non-exclusive contracts
Issue Date: Feb-2004
Series/Report no.: S-MF-04-03
Abstract: This paper studies the institution of bankruptcy when exclusive contracts cannot be enforced ex ante, e.g., a bank cannot monitor whether the borrower enters into contracts with other creditors. The institution of bankruptcy enables the bank to enforce its claim to any funds that the borrower has above a fixed “bankruptcy protection” level. Bankruptcy improves on non-exclusive contractual relationships but is not a perfect substitute for exclusivity ex ante. We characterize the effect of bankruptcy provisions on the equilibrium contracts which borrowers use to raise financing.
URI: http://hdl.handle.net/2451/27299
Appears in Collections:Macro Finance

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