 Information acquisition, foreign bank entry, and credit allocationThe Quarterly Review of Economics and Finance, 2014, vol. 54, issue 3, 324-336 Abstract: This paper presents a theoretical framework to understand the impact of foreign bank entry on the access to and the price of credit for different types of firms. A major point of departure from the previous literature is that incumbents’ information about firms is endogenous in the model; previous screenings and lending relations of incumbents determine which type(s) of firms they can identify. I show that incumbents’ information is negatively correlated with the quality of borrowers. Moreover, although a priori entrants have a comparative advantage in lending to transparent firms, previous lending relations of incumbents might reverse this relation. In particular, given that transparent firms are the only type screened before the entry and therefore they are the only type distinguishable by incumbents, entrants might have a comparative advantage in lending to opaque firms. The analysis provides new insights into the inconclusive evidence of the literature regarding entrants’ credit allocation. Keywords: Foreign entry; Credit allocation; SMEs (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:quaeco:v:54:y:2014:i:3:p:324-336 DOI: 10.1016/j.qref.2014.04.008 Access Statistics for this article The Quarterly Review of Economics and Finance is currently edited by R. J. Arnould and J. E. Finnerty More articles in The Quarterly Review of Economics and Finance from Elsevier |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.