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The Dual Role of Demand Deposits under Asymmetric Information

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  • Vale, Bent

Abstract

When there is initial asymmetric information between lenders and borrowers, accepting checkable deposits can give banks information about the quality of future borrowers. Hence, the two main types of bank activities are complementarities. Nevertheless, i t is shown that intermediaries who fund themselves by other means and, thus, do not get the same borrower information as banks, can coexist with banks in equilibrium. With the possibility of legally binding contingent contracts, banks earn zero expected profits in equilibriu m in spite of their information advantage relative to other intermediaries. If legally binding contingent contracts are infeasib le, there may exist an implicit contract equilibrium. Copyright 1993 by The editors of the Scandinavian Journal of Economics.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Scandinavian Journal of Economics.

Volume (Year): 95 (1993)
Issue (Month): 1 ()
Pages: 77-95

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Handle: RePEc:bla:scandj:v:95:y:1993:i:1:p:77-95

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Web page: http://onlinelibrary.wiley.com/journal/10.1111/(ISSN)1467-9442

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Cited by:
  1. Hans Degryse & Steven Ongena, 2002. "Bank-Firm Relationships and International Banking Markets," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 9(3), pages 401-417.
  2. Djedidi-Kooli, Salima, 2009. "L’accès au financement des PME en France : quel rôle joué par la structure du système bancaire ?," Economics Thesis from University Paris Dauphine, Paris Dauphine University, number 123456789/8354 edited by Etner, François, September.
  3. Doris Neuberger & Solvig Räthke, 2009. "Microenterprises and multiple bank relationships: The case of professionals," Small Business Economics, Springer, vol. 32(2), pages 207-229, February.
  4. Dia, Enzo, 2013. "How do banks respond to shocks? A dynamic model of deposit-taking institutions," Journal of Banking & Finance, Elsevier, vol. 37(9), pages 3623-3638.
  5. Steven Ongena, 1999. "Lending Relationships, Bank Default and Economic Activity," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 6(2), pages 257-280.
  6. Kim, Moshe & Kliger, Doron & Vale, Bent, 2003. "Estimating switching costs: the case of banking," Journal of Financial Intermediation, Elsevier, vol. 12(1), pages 25-56, January.
  7. Jean J. GABSZEWICZ & Didier, LAUSSEL & Ornella, TAROLLA, 2008. "To acquire or to compete ? An entry dilemna," Discussion Papers (ECON - Département des Sciences Economiques) 2008019, Université catholique de Louvain, Département des Sciences Economiques.
  8. Enzo Dia, 2004. "Imperfect Information and Monopolistic Pricing in the Banking Industry," Working Papers 74, University of Milano-Bicocca, Department of Economics, revised May 2004.
  9. Hyytinen, Ari & Toivanen, Otto, 2004. "Monitoring and market power in credit markets," International Journal of Industrial Organization, Elsevier, vol. 22(2), pages 269-288, February.
  10. Hans Degryse & Steven Ongena, 2004. "The Impact of Competition on Bank Orientation and Specialization (new titel: The impact of competition on bank orientation)," CESifo Working Paper Series 1119, CESifo Group Munich.
  11. Degryse, H.A. & Ongena, S., 2000. "Bank Relationship and Firm Profitability," Discussion Paper 2000-14, Tilburg University, Center for Economic Research.
  12. Ongena, S. & Smith, D.C., 2000. "Bank relationships: A review," Open Access publications from Tilburg University urn:nbn:nl:ui:12-80678, Tilburg University.
  13. Enzo Dia, 2002. "A Reconciliation of the Evidence about Bank Lending with Portfolio Theory," Working Papers 56, University of Milano-Bicocca, Department of Economics, revised Sep 2002.
  14. Degryse, H.A. & Ongena, S., 2006. "The Impact of Competition on Bank Orientation," Discussion Paper 2006-68, Tilburg University, Center for Economic Research.
  15. Tlili, Rim, 2012. "Comment justifier la multibancarité au sein des PME ?," Economics Thesis from University Paris Dauphine, Paris Dauphine University, number 123456789/10919 edited by Etner, François, September.

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