Financial specialization, bank opacity, and the structure of credit markets

Luis Araujo, Raoul Minetti, Gustavo Moherdaui and Alessandro Tomarchio

MPRA Paper from University Library of Munich, Germany

Abstract: Financial specialization shapes the impact of financial institutions on the real economy. We study the determinants and real sector consequences of banks’ specialization in an economy where banks’ access to liquidity depends on investors’ information on the quality of banks’ assets. When choosing their sectoral specialization, banks trade off the benefits of sectoral expertise on borrowers’ investments with the incentive to maintain opacity on shocks to loan portfolios. The model generates a distribution of banks by size and specialization in which small banks specialize more, and lend to more informationally opaque firms, than larger banks. We show that regulations that promote financial disclosure enhance banks’ specialization, increasing welfare, while bank size regulations can distort banks’ specialization downward. The predictions of the model are consistent with evidence from granular matched bank-firm data from Peru.

Keywords: Financial Specialization; Banking Structure; Information; Shocks; Financial Regulation (search for similar items in EconPapers)
JEL-codes: D83 E44 G21 (search for similar items in EconPapers)
Date: 2025-09-30
New Economics Papers: this item is included in nep-fdg and nep-ifn
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/126320/1/MPRA_paper_126320.pdf original version (application/pdf)

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:pra:mprapa:126320

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().