Information-based pricing in specialized lending

Kristian Blickle, Zhiguo He, Jing Huang and Cecilia Parlatore

Journal of Financial Economics, 2025, vol. 172, issue C

Abstract: We study how competition between asymmetrically informed banks, one specialized and one nonspecialized, affects loan prices. Both banks possess “general” signals regarding the borrower’s quality, which they use to screen loans. The specialized bank also has access to a “specialized” signal on which it bases its loan pricing. This private information-based pricing makes the specialized bank bid more aggressively, mitigating the informational rent effect that gives it monopolistic power. Our findings explain why loans from specialized lenders feature lower interest rates and better ex post performance. Supporting empirical evidence emphasizes the role of specialized information in shaping credit market outcomes.

Keywords: Credit market competition; Common value auction with asymmetric bidders; Winner’s curse; Winning bids versus bids; Information acquisition (search for similar items in EconPapers)
JEL-codes: G21 L13 L52 O33 O36 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0304405X25001436
Full text for ScienceDirect subscribers only

Related works:
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:eee:jfinec:v:172:y:2025:i:c:s0304405x25001436

DOI: 10.1016/j.jfineco.2025.104135

Access Statistics for this article

Journal of Financial Economics is currently edited by G. William Schwert

More articles in Journal of Financial Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().