Information Span in Credit Market Competition

Zhiguo He (), Jing Huang and Cecilia Parlatore

No 33141, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We develop a credit market competition model that distinguishes between information span (breadth) and signal precision (quality), capturing the rise of fintech/nonbank lending where traditionally subjective (soft) information is transformed into objective (hard) data. Borrower quality depends on multidimensional fundamentals, assessed through hard or soft signals. Two banks observe private hard signals, but only the specialized bank receives a soft signal. Expanding the span of hard information enables the non-specialized bank to evaluate characteristics previously only available to the specialist, and reducing its winners curse. By contrast, greater precision of hard signals strengthens the specialized banks informational advantage.

JEL-codes: G21 L13 L52 O33 O36 (search for similar items in EconPapers)
Date: 2024-11
New Economics Papers: this item is included in nep-ban, nep-com, nep-fdg and nep-ind
Note: CF IO PR
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