Asymmetric Information and Imperfect Competition in Lending Markets

Fabiano Schivardi, Gregory Crawford and Nicola Pavanini

No 10473, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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.

Keywords: Assymetric information; Credit markets; Imperfect competition; Lending markets (search for similar items in EconPapers)
JEL-codes: D82 G21 L13 (search for similar items in EconPapers)
Date: 2015-03
New Economics Papers: this item is included in nep-ban, nep-cfn, nep-com and nep-cta
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Citations: View citations in EconPapers (11)

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Related works:
Journal Article: Asymmetric Information and Imperfect Competition in Lending Markets (2018)
Working Paper: Asymmetric Information and Imperfect Competition in Lending Markets (2017)
Working Paper: Asymmetric Information and Imperfect Competition in Lending Markets (2015)
Working Paper: Asymmetric information and imperfect competition in lending markets (2015)
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