The number of firm bankruptcies is surprisingly low in economies with poor institutions. We study a model of bank-firm relationship and show that the bank's decision to liquidate bad firms has two opposing effects. First, the bank gets a payoff if a firm is liquidated. Second, it loses the rent...

This paper links the current sub-prime mortgage crisis to a decline in lending standards associated with the rapid expansion of this market. We show that lending standards declined more in areas that experienced larger credit booms and house price increases. We also find that the underlying...

We study the effects of competition on loan rates and loan portfolio quality in microcredit markets using a new database from rating agencies, covering 379 for-profit and nonprofit microfinance institutions (MFIs) in 67 countries over 2002-2008. First, we find competitive pressures from...