Private banks often blame state guarantees to distort competition by giving public banks the advantage of lower funding costs. In this paper I show that if borrowers perceive the public bank as supporting economic development, private banks may be able to separate firms by self selection, enter...

Private banks often blame state guarantees to distort competition by giving public banks the advantage of lower funding costs. In this paper I show that if borrowers perceive the public bank as supporting economic development, private banks may be able to separate firms by self selection, enter...

Private banks often blame state guarantees to distort competition by giv- ing public banks the advantage of lower funding costs. In this paper I show that if borrowers perceive the public bank as supporting economic develop- ment, private banks may be able to separate firms by self selection,...

Private banks often blame state guarantees to distort competition by giving public banks the advantage of lower funding costs. In this paper I show that if borrowers perceive the public bank as supporting economic development, private banks may be able to separate ï¬rms by self selection,...

Public banks are often blamed to possess an unfair competitive advantage in the form of lower funding costs due to a state guarantee on their deposits. However, public and private banks tend to differ not only in their funding costs, but also in the way they deal with borrowers in financial...