Determinants of Strategic Behavior: Evidence from a Foreclosure Moratorium

55 Pages Posted: 12 Feb 2021 Last revised: 2 Mar 2022

See all articles by Nikolaos T. Artavanis

Nikolaos T. Artavanis

Tulane University

Ioannis Spyridopoulos

American University, Kogod School of Business

Date Written: March 1, 2022

Abstract

We study mortgagors' attitudes toward strategic behavior following a foreclosure moratorium in Greece. We identify strategic delinquencies by exploiting the concurrent introduction of a debt discharge process that provides generous debt relief for borrowers who prove their inability to pay but entails high costs for those who can afford their mortgages. This setting creates distinct optimal strategies for delinquent borrowers: non-strategic mortgagors participate in the debt discharge process, whereas strategic borrowers use the moratorium to protect their homes. Our results indicate borrower sophistication, aversion to moral hazard, banking relationships, and preference for liquidity play an important role in strategic behavior.

Keywords: Strategic behavior, credit market interventions, moratorium, moral hazard

JEL Classification: G21, D10, K35

Suggested Citation

Artavanis, Nikolaos T. and Spyridopoulos, Ioannis, Determinants of Strategic Behavior: Evidence from a Foreclosure Moratorium (March 1, 2022). Available at SSRN: https://ssrn.com/abstract=2946595 or http://dx.doi.org/10.2139/ssrn.2946595

Nikolaos T. Artavanis (Contact Author)

Tulane University ( email )

A.B. Freeman School of Business
7 McAlister Drive
New Orleans, LA 70118
United States

Ioannis Spyridopoulos

American University, Kogod School of Business ( email )

4400 Massachusetts Ave, NW
Washington, DC 20016
United States

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