Asymmetric Information and the Market Structure of the Banking Industry

Asymmetric Information and the Market Structure of the Banking Industry

Author: Mr.Giovanni Dell'Ariccia

Publisher: International Monetary Fund

Published: 1998-06-01

Total Pages: 32

ISBN-13: 145195154X

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The paper analyzes the effects of informational asymmetries on the market structure of the banking industry in a multi-period model of spatial competition. All lenders face uncertainty with regard to borrowers’ creditworthiness, but, in the process of lending, incumbent banks gather proprietary information about their clients, acquiring an advantage over potential entrants. These informational asymmetries are an important determinant of the industry structure and may represent a barrier to entry for new banks. The paper shows that, in contrast with traditional models of horizontal differentiation, the steady-state equilibrium is characterized by a finite number of banks even in the absence of fixed costs.


Ownership and Asymmetric Information Problems in the Corporate Loan Market

Ownership and Asymmetric Information Problems in the Corporate Loan Market

Author: Lewis Gaul

Publisher: CreateSpace

Published: 2015-01-01

Total Pages: 32

ISBN-13: 9781505310306

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In credit markets, asymmetric information problems arise when borrowers have private information about their creditworthiness that is not observable by lenders. If these informational asymmetries do not negatively affect lenders' profitability, then they are irrelevant to lenders.


The Oxford Handbook of Entrepreneurial Finance

The Oxford Handbook of Entrepreneurial Finance

Author: Douglas Cumming

Publisher: OUP USA

Published: 2012-03-22

Total Pages: 937

ISBN-13: 0195391241

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Provides a comprehensive picture of issues dealing with different sources of entrepreneurial finance and different issues with financing entrepreneurs. The Handbook comprises contributions from 48 authors based in 12 different countries.


Asymmetric Information, Corporate Finance, and Investment

Asymmetric Information, Corporate Finance, and Investment

Author: R. Glenn Hubbard

Publisher: University of Chicago Press

Published: 2009-05-15

Total Pages: 354

ISBN-13: 0226355942

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In this volume, specialists from traditionally separate areas in economics and finance investigate issues at the conjunction of their fields. They argue that financial decisions of the firm can affect real economic activity—and this is true for enough firms and consumers to have significant aggregate economic effects. They demonstrate that important differences—asymmetries—in access to information between "borrowers" and "lenders" ("insiders" and "outsiders") in financial transactions affect investment decisions of firms and the organization of financial markets. The original research emphasizes the role of information problems in explaining empirically important links between internal finance and investment, as well as their role in accounting for observed variations in mechanisms for corporate control.


Household Credit Usage

Household Credit Usage

Author: B. W. Ambrose

Publisher: Springer

Published: 2007-10-29

Total Pages: 293

ISBN-13: 0230608914

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In response to growing interest in household finance, this collection of essays with a foreword by John Y. Campbell, studies household and consumer use of credit instruments. It shows how individual consumers and households utilize various credit alternatives in managing their consumption and savings and suggests areas for future research.


Bank Lending in the Knowledge Economy

Bank Lending in the Knowledge Economy

Author: Mr.Giovanni Dell'Ariccia

Publisher: International Monetary Fund

Published: 2017-11-07

Total Pages: 45

ISBN-13: 1484324897

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We study bank portfolio allocations during the transition of the real sector to a knowledge economy in which firms use less tangible capital and invest more in intangible assets. We show that, as firms shift toward intangible assets that have lower collateral values, banks reallocate their portfolios away from commercial loans toward other assets, primarily residential real estate loans and liquid assets. This effect is more pronounced for large and less well capitalized banks and is robust to controlling for real estate loan demand. Our results suggest that increased firm investment in intangible assets can explain up to 20% of bank portfolio reallocation from commercial to residential lending over the last four decades.


The Changing Geography of Banking and Finance

The Changing Geography of Banking and Finance

Author: Pietro Alessandrini

Publisher: Springer Science & Business Media

Published: 2009-06-16

Total Pages: 304

ISBN-13: 0387980784

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The editors and contributors tackle a timely subject, and present rigorous research and analysis to demonstrate counter-intuitive results. In so doing, they reinforce the connections between organization and policy in the banking industry and its impact on entrepreneurship, through lending and credit to small and medium-sized businesses. The editors present a carefully organized manuscript that presents both literature reviews and the results of original empirical research that will be of interest to academics and professionals in finance, economics, and policy. The authorship and coverage are global. One of the authors, Michele Fratiani, has close ties to Springer, by virtue of his being a founding editor of Open Economies Review and co-editor of the book series, European and Transatlantic Studies.


Reforming Collateral Laws to Expand Access to Finance

Reforming Collateral Laws to Expand Access to Finance

Author: Heywood W. Fleisig

Publisher: World Bank Publications

Published: 2006

Total Pages: 120

ISBN-13: 082136491X

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Most readers, especially those with car loans or home mortgages, know about "collateral"--property that the lender can take away from the borrower in the event that the borrower defaults. In low/middle income countries, it is understood that conservative lenders exclude firms from credit markets with their excessive collateral requirements. Usually, this is because only some property is acceptable as collateral: large holdings of urban real estate and, sometimes, new motor vehicles. Microenterprises, SMEs, and the poor have little of this property but they do have an array of productive assets that could easily be harnessed to serve as collateral. It is only the legal framework which prevents firms from using these assets to secure loans. In countries with reformed laws governing collateral, property such as equipment, inventory, accounts receivable, livestock are considered excellent collateral. This book aims to better equip project managers to implement reforms to the legal and institutional framework for collateral (secured transactions). It discusses the importance of movable property as a source of collateral for firms, the relationship between the legal framework governing movable assets and the financial sector consequences for firms (better loan terms, increased access, more competitive financial sector), and how reforms can be put in place to change the lending environment.


Financial Crises

Financial Crises

Author: Brenda Spotton Visano

Publisher: Routledge

Published: 2006-04-18

Total Pages: 218

ISBN-13: 1134229984

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This study explores the major patterns of change in the evolution of financial crises as enduring phenomena and analyzes the paradoxical position that crises are at once similar to and different from each other. Brenda Spotton-Visano examines economic, psychological and social elements intrinsic to the process of capitalist accumulation and innovation to explain the enduring similarities of crises across historical episodes. She also assesses the impact that changing financial and economic structures have on determining the specific nature of crises and the differential effect these have in focal point, manner and extent of transmission to other, otherwise unrelated, parts of the economy. Financial Crises offers a consistent method for interpreting variations in financial crises through time and allows for a better overall appreciation for both the transitory fragility and enduring flexibility of financial capitalism and the potential vulnerability created by on-going financial development. Topical and informative, this key book is of keen interest to all those studying and researching international economics and political economy.


Information Asymmetries in Developing Country Financing

Information Asymmetries in Developing Country Financing

Author: Mr.George C. Anayotos

Publisher: International Monetary Fund

Published: 1994-07-01

Total Pages: 28

ISBN-13: 1451955782

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This paper assesses the impact of information asymmetries on developing country financing and considers alternative techniques to reduce the adverse implications of such asymmetries. Following an introduction, Section II examines in general terms the role of information in financial markets and analyzes the incentive and risk sharing properties of alternative financial contracts. Information asymmetries which are present in domestic finance are more prevalent in international finance, in particular in developing country financing. Section III reviews measures aiming to resolve information asymmetries. Borrowing and creditor country regulations and policies, as well as innovative contractual agreements help to resolve a range of issues related to information asymmetries. However, despite their contribution, residual problems remain unresolved. The international financial institutions, and in particular the Fund, have an important role to play in alleviating information asymmetries.