 Interbank competition and information production: Evidence from the interest rate differenceJournal of Financial Intermediation, 2010, vol. 19, issue 2, 279-304 Abstract: In this paper, using firm-level cross-sectional data in the US, we report that interest rates on loans extended by inside banks are significantly lower than those on loans extended by outside banks for younger firms in concentrated loan markets, while such loan rate differences are not clearly observed in competitive loan markets. The analytical model presented in this paper predicts that an inside bank is more likely to quote rates lower than those of outside banks to capture a customer in order to gain time to establish exclusive access to the customer's private information, counting on the consequent future rent from informational advantages over rival banks, if the inside bank intends to acquire private information about the borrower's creditworthiness. In light of this prediction, we conclude that the above empirical finding is consistent with the hypothesis that increased competition discourages banks from collecting borrower-specific private information. Keywords: G21; L11; L14; Relationship; banking; Credit; market; structure; Information; acquisition (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinin:v:19:y:2010:i:2:p:279-304 Access Statistics for this article Journal of Financial Intermediation is currently edited by Elu von Thadden More articles in Journal of Financial Intermediation from Elsevier |
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