Title: Adverse selection and moral hazard in the credit market : using security interests to reduce credit rationing
Other Titles: Averechtse selectie en moral hazard in de kedietmarkt : het gebruik van zekerheden voor het tegengaan van kredietschaarste
Authors: Helsen, Frederic
Issue Date: 5-Nov-2016
Abstract: Capital markets fail to bring supply and demand together, causing credit to be rationed. This failure is a consequence of adverse selection and moral hazard in the relationship between borrowers and lenders, and leads to inefficiencies and welfare losses.
Security rights can be used to reduce adverse selection and tackle moral hazard, by enabling borrowers to signal private information about their risk qualities, realigning incentives, and reducing net risk. They can also, however, create more adverse selection. The first part of this dissertation will analyze whether, and under which conditions, security rights can increase efficiency. The second part will then test Belgian law’s conformity with this framework, using US law as an outside testing system, in order to achieve a profound understanding of the workings of security rights, as well as policy conclusions towards improvement of Belgian law.
Publication status: accepted
KU Leuven publication type: TH
Appears in Collections:Institute for Commercial and Insolvency Law

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