Overview

Paola Brighi () and Maurizio Mussoni ()
Additional contact information
Paola Brighi: University of Milan
Maurizio Mussoni: University of Bologna

Chapter Chapter 1 in The Bank-Business Relationship, 2025, pp 1-6 from Springer

Abstract: Abstract Asymmetric information significantly challenges bank lending behaviour by introducing uncertainty about borrowers’ creditworthiness (see Chapter 2 ), which in turn creates conditions for credit rationing (see Chapter 3 ). Trust, relational capital and regulation are critical mechanisms to mitigate the adverse effects of asymmetric information. Trust between the bank and the firm reduces perceived risk and facilitates smoother financial transactions, while relational capital, built through long-term interactions, provides banks with valuable proprietary information. As we will see, both trust and relational capital are strictly linked with relationship lending (see Chapter 4 ). Regulation and supervision by banking authorities can, in many ways, intervene to mitigate the negative effects of moral hazard and adverse selection (see Chapter 5 ) and help banks manage the ongoing “twin transition” towards digitalization and sustainability (see Chapter 6 ). Together, these elements enable banks to navigate informational asymmetries more effectively, thereby promoting better credit allocation and fostering economic stability.

Keywords: Market failures; Credit rationing; Relationship lending; Regulation (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

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:spr:sprchp:978-3-031-91068-5_1

Ordering information: This item can be ordered from
http://www.springer.com/9783031910685

DOI: 10.1007/978-3-031-91068-5_1

Access Statistics for this chapter

More chapters in Springer Books from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().