Inter-company matching and the supply of informed capital

Fernando Anjos () and Alejandro Drexler ()

Journal of Economic Behavior & Organization, 2015, vol. 111, issue C, 119-136

Abstract: We model an economy where it is beneficial for high-type organizations to collaborate with other high types, and where this assortative-matching pattern allows informed financiers to provide inexpensive funds to partner companies of their high-type ventures. The expected funding benefit associated with finding high-type partners increases in the supply of informed capital, which creates an additional incentive for high types to search. Our main result is that, in such a setting, a critical mass of informed capital is sometimes required for an efficient equilibrium to obtain. We provide a novel channel for how the financial sector can impact real outcomes, specifically by affecting matching patterns.

Keywords: Financial intermediation; Matching; Venture capital (search for similar items in EconPapers)
JEL-codes: D20 D80 G24 G32 L20 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:111:y:2015:i:c:p:119-136

DOI: 10.1016/j.jebo.2014.12.028

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