Borrower Poaching and Information Display in Credit Markets

Hans Degryse and Jan Bouckaert

No 2936, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: The Riegle-Neal Act in the US and the Economic and Monetary Union in Europe are recent initiatives to stimulate financial integration. These initiatives allow new entrants to ?poach? the incumbents' clients by offering them attractive loan offers. We show that these deregulations may be insufficient since asymmetric information seriously hampers the integration of credit markets. This asymmetry stems from the informational advantage incumbent banks have about their current clients vis-a-vis potential entrants. Moreover, banks may strategically display some information, hindering entry when asymmetric information is moderate. We also show that voluntary information sharing emerges only when asymmetric information is low.

Keywords: Financial integration; Banking competition; Asymmetric information; Barriers to entry (search for similar items in EconPapers)
JEL-codes: D43 G21 L13 (search for similar items in EconPapers)
Date: 2001-09
References: Add references at CitEc
Citations: View citations in EconPapers (6)

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