Group-lending with sequential financing,contingent renewal and social capital

This paper focuses on the dynamic aspects of group-lending, in particular sequential financing and contingent renewal. We examine the efficacy of these two schemes in harnessing social capital. We find that, for the appropriate parameter configurations, there is homogenous group-formation so that the lender can ascertain the identity of a group without lending to all its members, thus screening out bad borrowers partially. Moreover, under certain parameter configurations, negative assortative matching occurs as a robust phenomenon.     

Screening by the Company You Keep: Joint Liability Lending and the Peer Selection Effect

We look at an economic environment where borrowers have some information about the nature of each other's projects that lenders do not. We show that joint-liability lending contracts, similar to those used by credit cooperatives and group-lending schemes, will induce endogenous peer selection in the formation of groups in a way that the instrument of joint liability can be used as a screening device to exploit this local information. This can improve welfare and repayment rates if standard screening instruments such as collateral are unavailable.     

Group insurance and lending with endogenous social collateral

We construct a dynamic model of self-enforcing insurance provision and lending to a community of borrowers who are connected by risk-sharing arrangements that are themselves subject to enforcement problems, as in Kocherlakota (1996). We show that an outside lender offering constant-consumption contracts can earn a higher profit if he conditions his repeated interactions with each borrower on the history of his interactions with all the group members (a joint liability contract), rather than on his history with that borrower only (individual liability contracts). This result holds even in the absence of informational asymmetries. The observation driving it is that with individual liability contracts, a joint welfare-maximizing group may prefer to have one or more group members default on their contracts, so that the group can consume a mix of outside funds and the defaulters' stochastic income. One contribution of our work is to give precise economic content to the concept of “social collateral” as the per-agent surplus from group risk-sharing over autarky. The group can deter its members from defaulting on their contracts with the principal by threatening to reduce that surplus.     

Bilateral transfers and lending in international environmental cooperation

The paper analyzes environmental lending and transfers in a two country general equilibrium framework. The lender country chooses specific environmental investments which it finances in the neighbour country on the basis of the returns they generate for the lender. The gains from this kind of international environmental financing are illustrated with a numerical calibration of the model showing that the gains to the lender country may be fairly sizable in relation to the expenditure directed currently towards environmental protection. These gains, however, essentially depend on the terms of the environmental financing. We also find that debt-for-nature swaps do not in general produce efficient environmental protection if applied uniformly in international environmental financing.     

Creditor concentration: An empirical investigation

Most of the literature on multiple banking assumes equal financing shares. However, unequal, asymmetric or concentrated bank borrowing is widespread, and creditor concentration is only weakly correlated with the number of bank relationships. This paper therefore investigates the determinants of creditor concentration for German firms using a comprehensive firm-bank level dataset for the time period between 1993 and 2003. We document that corporate borrowing from banks is very often concentrated, even for the largest firms in our sample. Leveraged firms and firms with more redeployable assets concentrate their borrowing from banks, as are firms dealing with a relationship lender that is profitable, that has lower monitoring costs, or that operates in a concentrated regional lending market.     

SCREENING AS A UNIFIED THEORY OF DELINQUENCY,RENEGOTIATION, AND BANKRUPTCY

We propose a parsimonious model with adverse selection where delinquency, renegotiation, and bankruptcy all occur in equilibrium as a result of a simple screening mechanism. A borrower has private information about her endowment, and a lender uses random contracts to screen different types of borrowers. In equilibrium, some borrowers choose not to repay and thus become delinquent. The lender renegotiates with some delinquent borrowers. In the absence of renegotiation, delinquency leads to bankruptcy. Applied to mortgage restructuring, our mechanism generates amplification of house‐price shocks through foreclosure spillovers. We also show that government intervention aimed at limiting foreclosures may have unintended consequences.     

Liquidity risk and bank portfolio allocation

The joint existence of a lender of last resort and of a stock market is usually considered the sign of a developed financial infrastructure. This paper analyzes whether a securities market may play a role similar to that of a lender of last resort by being of assistance to a bank, which faces possible liquidity shortages. We examine which of these two institutions best prevents a bank's liquidity shortages while allowing the optimal allocation of the bank's resources. Our results suggest that securities markets matter more for the liquidity of banks than a lender of last resort.     

Leniency policies and illegal transactions

We study the consequences of leniency—reduced legal sanctions for wrongdoers who spontaneously self-report to law enforcers—on sequential, bilateral, illegal transactions, such as corruption, manager–auditor collusion, or drug deals. It is known that leniency helps deterring illegal relationships sustained by repeated interaction. Here we find that—when not properly designed—leniency may simultaneously provide an effective governance mechanism for occasional sequential illegal transactions that would not be feasible in its absence.     

The impact of public ownership in the lending sector

We examine the effects of increased government ownership of suppliers in the lending sector, which induces increased concern with total welfare and reduced concern with profit. Such increased ownership of a lender can have unanticipated effects. For instance, it can increase lender profit. Furthermore, borrower welfare often declines as government ownership increases in a lender with a relatively limited ability to discern the true quality of borrowers’ projects. In addition, there are settings in which increased government ownership of a lender has no impact on either lender profit or borrower welfare.     

Social collateral,dynamic incentives,and joint liability in a two‐step trust game: Lending to the unbankable

Asymmetric information and lack of collateral creates a suboptimal allocation of financial resources to those in most need. When uncollateralised borrowers approach financial institutions, the presence of moral hazard and adverse selection results in no lending. Conversely, group‐lending contracts—joint liability, dynamic lending, and social cost for defaulting—control for information asymmetries and create a co‐operative trust game between borrowers leading to an undominated optimal strategy to repay, and therefore, for the lender to Give. Group lending proves superior to typical individual borrowing and lending when no collateral is available. Social collateral and trust are fundamental pieces of the successful work of MicroFinance. Resulting contracts and correspondent payoffs are Pareto efficient.     

Tax progressivity, income distribution and tax non-compliance

This article examines the determinants of tax non-compliance when we recognise the existence of an imperfectly competitive “tax advice” industry supplying schemes which help taxpayers reduce their tax liability. We apply a traditional industrial organisation framework to model the behaviour of this industry. This tells us that an important factor determining the equilibrium price and hence, the level of non-compliance, is the convexity of the demand schedule. We show that in this context, this convexity is affected by the distribution of pre-tax income, the progressivity of the tax-schedule and the way in which monitoring and penalties vary with income. It is shown that lower pre-tax income inequality as well as a less progressive tax code may cause more tax minimisation activities. Therefore, the frequently advocated policy of reducing the highest tax rate may fail as a policy directed at improving tax discipline. One way of offsetting the possible harm to tax compliance from a less progressive tax could be an adjustment of the penalty and monitoring functions.     

试用收益最大法分析企业最优负债比例

确定企业最优负债比例是企业在进行融资时一项十分重要的决策,文章在分析债务融资成本与收益的基础上,通过使边际收益为零分析出债务融资收益最大化时的负债比例。与通常的资本结构理论分析相比,这种分析更加直观,也具有更强的实用价值。     

DEVELOPING COUNTRY BORROWING FROM A MONOPOLISTIC LENDER: STRATEGIC INTERACTIONS AND ENDOGENOUS LEADERSHIP*

We develop a two‐period model with endogenous investment and credit flows. Credit is subject to quantitative restrictions. With an exogenous restriction, we analyse the welfare effects of a temporary consumption tax. We then consider three scenarios under which a monopoly lender optimally decides the level of credit and a borrower country chooses a consumption tax: one in which the two parties act simultaneously and two scenarios where one of them is a Stackleberg leader. The equilibrium under the leadership of the borrower country is Pareto superior to the simultaneous move equilibrium but may or may not be to that under the leadership of the lender. If the sequence of moves is itself chosen strategically, leadership by the borrower emerges as the unique equilibrium.     

Individual versus Village Lending: Evidence from Montenegro

This paper analyzes differences in loan performance across two Montenegrin microfinance institutions with different lending techniques using a sample of individuals borrowing from both institutions. We make use of administrative data from both institutions over the period 2004–2013. While one institution relies on village associations for screening and monitoring of borrowers, the other institution uses the individual liability approach. We find that the likelihood to go into arrears is higher for the institution with a strictly individual lending technique, while the likelihood of going into arrears over 30 days is higher for the institution working with village associations. These results are robust to a variety of additional tests, including different definitions of arrears and subsamples. Our findings suggest that the institution using an individual lending technique provides certain flexibility to its clients, while the village‐based microfinance institution might face more strategic default behavior. We provide evidence that once a borrower is in arrears, (s)he is more likely to stay in arrears for more than 30 days in branches with a higher share of borrowers in arrears and in the village‐based lender. Our findings provide evidence that a village‐ or group‐based lending technique is not necessarily superior to the individual lending technique in terms of loan performance.     

Firm size,credit scoring accuracy and banks’ production of soft information

Research on SME bank financing generally assumes that smaller firms are more opaque from a lender’s perspective. We propose that the discriminatory power of credit scoring models can be thought of as a proxy for firm opaqueness, given that when these models perform poorly, lenders must invest in the production of ‘soft information’ to supplement the financial data used in these models. Measuring the discriminatory power of probit default models across quintiles of the Irish SME size distribution, we show that our proxy for firm opaqueness increases monotonically as firms get smaller. This finding supports an assumption that is the starting point to a wide strand of literature on SME bank financing. Our findings can also be interpreted as providing an insight to the literature on the determinants of banks’ choice of lending technology. While smaller banks may, as found in a substantial previous literature, produce larger amounts of ‘soft information’ due to their organizational advantages, they may also do so out of necessity: hard-information-based default modelling is less effective among smaller firms, thereby forcing banks that lend to these borrowers to invest more in relationship banking technologies to retain competitiveness.     

Communication in repeated games with costly monitoring

We study repeated games with discounting where perfect monitoring is possible, but costly. It is shown that if players can make public announcements, then every payoff vector which is an interior point in the set of feasible and individually rational payoffs can be implemented in a sequential equilibrium of the repeated game when the discount factor is high enough. Thus, efficiency can be approximated even when the cost of monitoring is high, provided that the discount factor is high enough.     

Childhood preventive care,adult healthcare and economic growth: The role of healthcare financing

We analyze the impact of healthcare financing on economic growth, focusing on the issue of the joint public–private financing of healthcare (co-payment). We use an overlapping-generations model with endogenous growth based on health human capital accumulation, where families pay for childhood preventive care and the government can either fully finance or co-finance adulthood curative care. From a growth maximizing perspective, distortionary taxes give an advantage to co-financing. Nevertheless, we prove that, if agents are assumed to be heterogeneous in preferences, full financing can become the best option.     

创业者与风险投资者之间的合约设计

本文根据风险资本的性质和不完全合约理论,针对高技术企业融资过程中创业者和风险投资者之间的合约在融资期限、融资轮次、联合投资、监控力度、证券设计等方面的特征进行了论证和分析.     

上市公司的所有权与融资结构

文章对上市公司的融资结构进行了研究,指出企业的国有（或国有控股）性质是企业资产负债率水平偏高的根本原因。与此相对应,民营企业的资产负债率水平则明显低于国有（或国有控股）企业。作者认为,现有的发行新股或债转股方式,并非是解决我国国有企业资产负债率水平偏高的根本出路。解决这一问题的最终途径可能还是在于调整所有权结构。另外,作者利用我国上市公司的数据,发现了与MMM理论相矛盾的一些事实,即我国的国有相对控股上市公司的资产负债率水平是与此类公司的所有权结构相关联的。     

The effect of lender and loan type on a borrowing firm’s equity return

Past empirical studies appear to support the idea that banks and finance companies do not differ in their ability to resolve adverse selection problems associated with issuing new debt. In this article, we find there is a difference. More specifically, using an event study we find larger abnormal returns for secured loan disclosures to lower quality borrowers when the lender is a finance company versus a bank. This suggests the market views finance companies as more effective than banks in evaluating/monitoring lower quality borrowers obtaining secured loans. We posit this is due to finance companies’ greater expertise in this type of lending, resulting from specialization. Our findings extend the literature on how lender identity can influence signals about firm value from loan disclosures. Our results also support recent findings that positive abnormal returns to borrowing firms may not be a general feature across the loan population, but may be restricted to smaller, lower quality borrowers. Finally, we are the first to provide evidence that the market takes loan type into account, not just lender and borrower type, when considering the information embedded in loan disclosures.