This research investigates how legal sanctions prevailing under bankruptcy may impact on debt contracting and on investing decision. We model firms having the opportunity to engage (or not) faulty management. In case of default, the firms may escape costly bankruptcy by reaching a private...

This research investigates how the legal sanctions prevailing under bankruptcy code impact on the design of debt contacts. Unlike most papers considering a passive behavior of the bank in case of default of the borrower, we assume the bank actively trades off between private renegotiation and...

This research investigates how legal sanctions prevailing under bankruptcy impact on debt contracting and on investing decision, when companies may engage faulty management. Unlike most papers considering a passive behavior of the bank in case of default of the borrower, the creditor and the...

The World Bank reports « Doing business » (2004, 2005 and 2006), referring to the main assumptions and findings of the « law and finance » theory, predict that the common law system provides better basis for financial development and economic growth than French origin civil law. This paper...

The formulation of legal rules is a challenging issue for lawmakers. Trade-offs are inevitable between providing more guidance by specific rules and enlarging the scope by general rules. Using real options theory we show that the degree of precision should be considered as a degree of...

We examine why banks resort to collateral, and whether their reasons vary according to the type of collateral. We use a unique dataset of bank loans granted to French distressed firms, which contains full information on the type and value of collaterals and the cause of firm default. Our work...

This research investigates how bankruptcy law influences the design of debt contracts and the investments choices. We model a lending relationship between a small firm and a monopolistic bank who decides the level of the interest rate. The firm may perform asset substitution, which is sanctioned...

This research investigates how bankruptcy law influences the design of debt contracts and the investment choice through the sanction of faulty managers. We model a lending relationship between a small firm and a monopolistic bank which decides the loan rate. The firm may perform asset...

Literature on ex-ante efficiency of bankruptcy procedures investigates how these procedures influence the behavior of managers and creditors. We extend this literature by explaining how bankruptcy law can influence the design of debt contracts through the recovery process. We develop a model of...