The research on mechanism of contingent governance of banks in game theory

Corporate governance is contingent governance. When the corporate borrowers come into financing difficulties and facing difficulties of returning the borrowing capital, banks as creditors should involve in the corporate governance and make a choice between the liquidation and the debt renegotiation. In this paper, we set up a four-time-point model to analyze the best choice of banks and conclude: to liquidate the problem corporate borrower is not the best choice of banks.