BENC seminar, 29 October, 2015, 4:30pm, DUBS 223

Speaker:         Dr. Jia Liu at Newcastle University

Topic:                 “Liquidation Policy and Disclosure of Credit History in Financial Contracting: An Experiment”

Date & Time:   29th October (Thursday), 4:30-5:45 PM

Venue:              Durham University Business School , 223

Abstract:  In the presence of contract incompleteness and asymmetric information, liquidation policy plays an important role in financial contracting. Liquidation is a double-edged sword. It deters borrowers from defaulting strategically, but it could be harsh to borrowers experiencing short-term liquidity problems. This paper presents an experimental analysis of the impacts of (1) liquidation policy on borrowers’ incentive to engage in strategic default and (2) disclosure of credit history information on lending relationships and borrowers’ behaviors. We show that liquidation policy deters borrowers from defaulting strategically, and the availability of credit information softens the liquidation policy and helps reduce strategic defaults.

Last modified: Wed, 28 Oct 2015 16:28:44 GMT