Information sharing and lending market competition under strong adverse selection

Jorge Fernández-Ruiz; Miguel García-Cestona

In a relatively recent paper, Gehrig and Stenbacka (Eur Econ Rev 51, 77–99, 2007) show that information sharing increases banks’ profits to the detriment of creditworthy entrepreneurs in a model of a banking duopoly with switching costs and poaching. They restrict their analysis to the case in which adverse selection is not too strong.We analyze the complementary case and show that, when the economy suffers from strong adverse selection, information sharing still increases banks’ profits, but it may or may not hurt talented entrepreneurs.

MoreLess

Year of publication:	2013
Authors:	Fernández Ruiz, Jorge ; García Cestona, Miguel Angel
Published in:	SERIEs : Journal of the Spanish Economic Association. - Berlin : Springer, ISSN 1869-4195, ZDB-ID 2536381-5. - Vol. 4.2013, 2, p. 235-245
Subject:	information sharing \| lending relationships \| poaching \| equilibrium switching \| Kreditwürdigkeit \| Credit rating \| Unternehmensgründung \| Business start-up \| Informationsverbreitung \| Information dissemination \| Adverse Selektion \| Adverse selection \| Unternehmensfinanzierung \| Corporate finance \| Kreditmarkt \| Credit market \| Theorie \| Theory