Koufopoulos, Konstantinos and Biswas, Swarnava (2019) Bank competition and financing efficiency under asymmetric information. Journal of corporate finance. ISSN 1872-6313
Abstract
We consider a setting in which an entrepreneur seeks bank financing, and the project type is her private information. Different from existing theories featuring information asymmetry, and consistent with empirical findings, our model predicts: greater bank competition leads to increased bank lending as interest rates fall, leading to lower quality loans. The relationship between market power and financing efficiency is hill-shaped. An intermediate level of market power is desirable, as it can mitigate inefficiencies arising due to cross-subsidization among borrowers in a pooling equilibrium. Interest rate controls may achieve efficiency, but the specific policy depends on the bank market structure.
Metadata
Item Type: | Article |
---|---|
Authors/Creators: |
|
Copyright, Publisher and Additional Information: | © 2019 Elsevier B.V. All rights reserved. This is an author-produced version of the published paper. Uploaded in accordance with the publisher’s self-archiving policy. |
Dates: |
|
Institution: | The University of York |
Academic Units: | The University of York > Faculty of Social Sciences (York) > Economics and Related Studies (York) |
Depositing User: | Pure (York) |
Date Deposited: | 09 Sep 2019 08:30 |
Last Modified: | 16 Oct 2024 15:59 |
Published Version: | https://doi.org/10.1016/j.jcorpfin.2019.101504 |
Status: | Published online |
Refereed: | Yes |
Identification Number: | 10.1016/j.jcorpfin.2019.101504 |
Open Archives Initiative ID (OAI ID): | oai:eprints.whiterose.ac.uk:150605 |
Download
Description: Bank Competition and Financing Efficiency under Asymmetric Information (Accepted Version, 26-08-2019)
Licence: CC-BY-NC-ND 2.5