Asymmetric information in corporate lending: evidence from SME bond markets

Alessandra Iannamorelli (), Stefano Nobili, Antonio Scalia and Luana Zaccaria ()
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Alessandra Iannamorelli: Bank of Italy

No 1292, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: Using a comprehensive dataset of Italian SMEs, we find that differences between private and public information on creditworthiness affect firms’ decisions to issue debt securities. Surprisingly, our evidence supports positive (rather than adverse) selection. Holding public information constant, firms with better private fundamentals are more likely to access bond markets. Additionally, credit conditions improve for issuers following the bond placement, compared with a matched sample of non-issuers. These results are consistent with a model where banks offer more flexibility than markets during financial distress and firms may use market lending to signal credit quality to outside stakeholders.

Keywords: asymmetric information; bank credit; bond markets; SME finance (search for similar items in EconPapers)
JEL-codes: G10 G21 G23 G32 (search for similar items in EconPapers)
Date: 2020-09
New Economics Papers: this item is included in nep-cfn and nep-fdg
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Citations: View citations in EconPapers (4)

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Related works:
Journal Article: Asymmetric Information and Corporate Lending: Evidence from SME Bond Markets* (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:bdi:wptemi:td_1292_20

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