Information Asymmetry and Credit Risk

Lorena Tupangiu
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Lorena Tupangiu: University of Craiova

Finante - provocarile viitorului (Finance - Challenges of the Future), 2017, vol. 1, issue 19, 153-157

Abstract: Information asymmetry defines relationships where an agent holds information while another does not hold it. Thus, to the extent that one of the parties to the financing agreement has information more or less accurate than another, the asymmetry of information appears to be a major constraint in the financing of a project. Banks, in their capacity of financial intermediary, operate the transfer of funds to agents in need of financing, to the borrowers, being necessary in this process to have more information in order to benefit of expertise in assessing borrowers. The research of information asymmetry and credit risk consists of interrogating the following aspects: information issues between the bank and borrowers; settlement of information issues; bank’s activism towards information asymmetry. In our approach we will look at the first aspect, namely the information issues between the bank and the borrowers.

Keywords: information asymmetry; credit relationship; credit risk; adverse selection; moral hazard (search for similar items in EconPapers)
JEL-codes: E52 E58 (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:aio:fpvfcf:v:1:y:2017:i:19:p:153-157

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