Learning about Competitors: Evidence from SME Lending
Monthly payment targeting and the demand for maturity
Olivier Darmouni and
Andrew Sutherland
The Review of Financial Studies, 2021, vol. 34, issue 5, 2275-2317
Abstract:
We study how small and medium enterprise (SME) lenders react to information about their competitors’ contracting decisions. To isolate this learning from lenders’ common reactions to unobserved shocks to fundamentals, we exploit the staggered entry of lenders into an information-sharing platform. Upon entering, lenders adjust their contract terms toward what others offer. This reaction is mediated by the distribution of market shares: lenders with higher shares or that operate in concentrated markets react less. Thus, contract terms are shaped not only by borrower or lender fundamentals but also by the interaction between information availability and competition.
JEL-codes: D43 D83 G20 G21 G32 O33 (search for similar items in EconPapers)
Date: 2021
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Working Paper: Learning about Competitors: Evidence from SME Lending (2018) 
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