Header

UZH-Logo

Maintenance Infos

Asymmetric information and imperfect competition in lending markets


Crawford, Gregory; Pavanini, Nicola; Schiwardi, Fabiano (2017). Asymmetric information and imperfect competition in lending markets. CEPR Discussion Papers 10473, Centre for Economic Policy Research.

Abstract

We study the effects of asymmetric information and imperfect competition in the market for small business lines of credit. We estimate a structural model of credit demand, loan use, pricing, and firm default using matched firm-bank data from Italy. We find evidence of adverse selection in the form of a positive correlation between the unobserved determinants of demand for credit and default. Our counterfactual experiments show that while increases in adverse selection increase prices and defaults on average, reducing credit supply, banks’ market power can mitigate these negative effects.

Abstract

We study the effects of asymmetric information and imperfect competition in the market for small business lines of credit. We estimate a structural model of credit demand, loan use, pricing, and firm default using matched firm-bank data from Italy. We find evidence of adverse selection in the form of a positive correlation between the unobserved determinants of demand for credit and default. Our counterfactual experiments show that while increases in adverse selection increase prices and defaults on average, reducing credit supply, banks’ market power can mitigate these negative effects.

Statistics

Citations

5 citations in Microsoft Academic

Downloads

5 downloads since deposited on 09 Feb 2018
5 downloads since 12 months
Detailed statistics

Additional indexing

Item Type:Working Paper
Communities & Collections:03 Faculty of Economics > Department of Economics
Dewey Decimal Classification:330 Economics
JEL Classification:D82, G21, L13
Uncontrolled Keywords:assymetric information, credit markets, imperfect competition, lending markets
Language:English
Date:October 2017
Deposited On:09 Feb 2018 09:58
Last Modified:20 Sep 2018 04:26
Series Name:CEPR Discussion Papers
Number of Pages:62
ISSN:0265-8003
OA Status:Green

Download

Download PDF  'Asymmetric information and imperfect competition in lending markets'.
Preview
Content: Published Version
Filetype: PDF (Revised version)
Size: 1MB