Search Results
Working Paper
Self-selection and discrimination in credit markets
This paper increases understanding of the causes and consequences of discrimination in credit markets. It develops an underwriting model in which lenders use a simple Bayesian updating process to evaluate applicant creditworthiness. It also models individuals' self-selection behavior to show how market frictions can affect application decisions.
Working Paper
Protection for whom? creditor conflicts in bankruptcy
Revised. In this article we provide a rationale for bankruptcy law that is based on the conflicts among creditors that occur when a debtor?s liabilities exceed its assets. In the absence of a bankruptcy law, the private debt-collection remedies that creditors pursue when a debtor is insolvent result in an ad hoc disposal of the debtor?s assets, thereby reducing the aggregate value of creditors? claims. We show that coordination clauses can be used by creditors in their loan agreements that will result in coordination, ex post. Although all creditors would benefit from including these clauses ...
Working Paper
The role of warrants in corporate reorganizations
An argument that informational asymmetries explain why the original shareholders of some firms emerge from Chapter 11 bankruptcy proceedings with stock in the reorganized company, while others receive warrants. By proposing a reorganization plan in which they receive warrants, the original stockholders of a firm with good future prospects can signal their superior information to the creditors in a way that firms with poor prospects will not wish to mimic.
Journal Article
Measuring pricing bias in mortgages
Detecting and measuring discrimination in the pricing of mortgage loans present unique challenges for bank regulators. This Commentary outlines how loans are priced in the mortgage market and the difficulties involved in comparing the prices charged to different borrowers.
Working Paper
A note on absolute priority rule violations, credit rationing, and efficiency
An argument that APR violations exacerbate credit rationing problems by reducing the payment lenders receive in default states.
Journal Article
Beneficial "firm runs"
The author argues that runs, which are generally considered undesirable, also have a beneficial effect--improving lenders' monitoring incentives. Lenders' ability to run on the firm helps control its moral hazard problem, while the first-come, first-served aspect of asset distribution keeps lenders from wanting to free ride on the monitoring efforts of others.
Journal Article
Absolute priority rule violations in bankruptcy
An examination of the impact of APR violations, demonstrating that the efficiency of such violations depends on the specific contracting problem with which a firm and its creditors are faced, and that as a result, an optimal bankruptcy institution should allow contract participants to decide ex ante whether such violations will occur.
Working Paper
Absolute priority rule violations, credit rationing, and efficiency
A demonstration that violations of the absolute priority rule exacerbate credit rationing problems by reducing the payment lenders receive in default states.
Journal Article
Beneath the rhetoric: clarifying the debate on mortgage lending discrimination
The authors' simple model of the mortgage underwriting process provides a framework within which to define discrimination and various notions of the default rate. By providing those with differing views a common framework for discussing their positions, the model clarifies and reconciles some of the most controversial issues in the debate over mortgage discrimination. It also shows how this theoretical framework can help in the design of practical policy responses to this vexing social problem.