The Lender-Borrower Relationship with Risk Averse Lenders

Arbeitspapier

This paper analyzes optimal incentive compatible debt contracts when lenders are risk averse. The decisive factor in this regard is that risk aversion requiresto consider further sources of risk the lenders are exposed to. The main resultsderived in a setting of asymmetric information – the payment obligation ofthe optimal incentive compatible contract increases due to risk aversion oflenders which is reinforced by the introduction of a further source of risk – are shown to be in line with the results from the industrial organization approachof banking. Moreover, the results of the present paper are more general thanthe ones from the industrial organization approach.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Volkswirtschaftliche Diskussionsreihe ; No. 244

Classification and Topics

• Classification: Wirtschaft ; Bankruptcy; Liquidation ; Information and Market Efficiency; Event Studies; Insider Trading
• Subject: debt contracts ; risk aversion ; costly state verification ; risk ; Kredit ; Finanzierungstheorie ; Risikoaversion ; Anreizvertrag ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Pausch, Thilo
• Event: Veröffentlichung
• (who): Universität Augsburg, Institut für Volkswirtschaftslehre
• (where): Augsburg
• (when): 2003

Further information

• Handle: http://hdl.handle.net/10419/22766
• Last update: 10.03.2025, 11:41 AM CET