Theory of Bank Lending with Monitoring and Application to Rural Banking in India 2002-2003
AbstractWe present a model in Costly State Verification framework that relates capital raised in a firm to profitability. We explain how optimality of investment is affected by how the aggregate funding affects the expected outcomes of the project. Although we find underinvestment, the problem does not get severe with increasing dead weight costs.
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Bibliographic InfoArticle provided by Euro-American Association of Economic Development in its journal International Journal of Applied Econometrics and Quantitative Studies .
Volume (Year): 2 (2005)
Issue (Month): 2 ()
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Web page: http://www.usc.es/economet/eaa.htm
Find related papers by JEL classification:
- G00 - Financial Economics - - General - - - General
- G29 - Financial Economics - - Financial Institutions and Services - - - Other
- G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
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