Summary
The purpose of this paper is to examine security agreements in the light of some well known models of financial theory. In section 1 a survey of common credit support decision models is given and the role of collateralization is examined in the context of these models. Section 2 seeks to prove that the neoclassical theory of finance fails to explain the empirical evidence of security agreements in credit-contracts. Section 3 examines a rather new approach and it is shown on the basis of this approach that security agreements can be interpreted in a rather satisfactoring manner. Collaterals and credit covenants are realized as instruments of influencing the trustworthiness of the borrower. In sections 4 and 5 finally several types of credit contract covenants are structurized and discussed with respect to their practical efficiency. In the appendix some main results of the neoclassical approach are proved in a more general way.
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Rudolph, B. (1986). The Value of Security Agreements. In: Bamberg, G., Spremann, K. (eds) Capital Market Equilibria. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-70995-1_5
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DOI: https://doi.org/10.1007/978-3-642-70995-1_5
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