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Learning about Competitors: Evidence from SME Lending

Olivier Darmouni and Andrew Sutherland ()

MPRA Paper from University Library of Munich, Germany

Abstract: This paper provides evidence of strategic complementarities in lenders’ contract terms in SME financing. To isolate this strategic effect from lenders’ joint reaction to unobserved common shocks to fundamentals, we exploit the staggered entry of lenders into an information sharing platform. Upon joining, lenders adjust their terms toward what others are offering. This effect is mediated by market power and seems to be driven by incentives to match rivals in order to preserve market share as opposed to learning about fundamentals. We also find evidence that this strategic behavior increased delinquencies during the recent crisis.

Keywords: competition; strategic complementarities; information sharing; credit bureau; corporate loans; SME (search for similar items in EconPapers)
JEL-codes: D22 D43 D82 D83 G00 G21 G24 G30 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban, nep-bec, nep-cfn, nep-com and nep-ent
Date: 2018
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https://mpra.ub.uni-muenchen.de/93668/1/MPRA_paper_93668.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/96206/1/MPRA_paper_96206.pdf revised version (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:93668

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