Lending Booms and Lending Standards
Giovanni Dell'ariccia and
Robert Marquez
Journal of Finance, 2006, vol. 61, issue 5, 2511-2546
Abstract:
We examine how the informational structure of loan markets interacts with banks' strategic behavior in determining lending standards, lending volume, and the aggregate allocation of credit. We show that, as banks obtain private information about borrowers and information asymmetries across banks decrease, banks may loosen their lending standards, leading to an equilibrium with deteriorated bank portfolios, lower profits, and expanded aggregate credit. These lower standards are associated with greater aggregate surplus and greater risk of financial instability. We therefore provide an explanation for the sequence of financial liberalization, lending booms, and banking crises observed in many emerging markets.
Date: 2006
References: Add references at CitEc
Citations: View citations in EconPapers (497)
Downloads: (external link)
https://doi.org/10.1111/j.1540-6261.2006.01065.x
Related works:
Working Paper: Lending Booms and Lending Standards (2005) 
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:bla:jfinan:v:61:y:2006:i:5:p:2511-2546
Ordering information: This journal article can be ordered from
http://www.afajof.org/membership/join.asp
Access Statistics for this article
More articles in Journal of Finance from American Finance Association Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().