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The Role of Dynamic Renegotiation and Asymmetric Information in Financial Contracting

By Harvard Law School Program on Corporate Governance

In the paper, The Role of Dynamic Renegotiation and Asymmetric Information in Financial Contracting, which was recently made publicly available on SSRN, I show that frequent renegotiation is an integral part of bank lending. Its role is as a complement to restrictive lending agreements that place significant constraints on borrowers? behaviors. Indeed, it is precisely because borrowers are able to renegotiate the terms of their contracts that they are willing to accept such restrictive contracts in the first place. Thus, the ex post renegotiations have several important implications for our understanding of bank lending.

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Full post as published by The Harvard Law School Corporate Governance Blog on January 19, 2011 (boomark / email).