The paper augments the asymmetric information literature on bank lending to new ventures by focusing on the more neglected area of moral hazard; specifically the relationship between risk aversion, an entrepreneur.s wealth and the provision of collateral. The results highlight some interesting...

The standard situation of ex post information asymmetry between borrowers and lenders is extended by risk aversion and heterogenous levels of reservation utility of lenders. In a situation of direct contracting optimal incentive compatible contracts are valuable for both, borrowers and lenders....

This paper explores the impact of credit market on the entrepreneurs and demand for credit in a credit constrained economy and the resultant impact on the capital flows. In standard trade models the capital flows across countries are explained as a result of the rate of return differentials due...