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Inter-company matching and the supply of informed capital

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  • Anjos, Fernando
  • Drexler, Alejandro

Abstract

We model an economy where it is beneficial for high-type organizations to collaborate with other high types, and where this assortative-matching pattern allows informed financiers to provide inexpensive funds to partner companies of their high-type ventures. The expected funding benefit associated with finding high-type partners increases in the supply of informed capital, which creates an additional incentive for high types to search. Our main result is that, in such a setting, a critical mass of informed capital is sometimes required for an efficient equilibrium to obtain. We provide a novel channel for how the financial sector can impact real outcomes, specifically by affecting matching patterns.

Suggested Citation

  • Anjos, Fernando & Drexler, Alejandro, 2015. "Inter-company matching and the supply of informed capital," Journal of Economic Behavior & Organization, Elsevier, vol. 111(C), pages 119-136.
    • Handle: RePEc:eee:jeborg:v:111:y:2015:i:c:p:119-136
    DOI: 10.1016/j.jebo.2014.12.028
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    Cited by:

    1. Chen Shengqun & Shi Hailiu & Li Meijuan & Wang Yingming & Lin Yang, 2016. "Two-Sided Matching Decision-Making with Uncertain Information Under Multiple States," Journal of Systems Science and Information, De Gruyter, vol. 4(2), pages 186-194, April.

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    More about this item

    Keywords

    Financial intermediation; Matching; Venture capital;
    All these keywords.

    JEL classification:

    • D20 - Microeconomics - - Production and Organizations - - - General
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General

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