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Benchmarking and Comparing Entrepreneurs with Incomplete Information

Author

Listed:
  • Juha-Pekka Niinimäki

    (Helsinki School of Economics, Department of Economics, Finland)

  • Tuomas Takalo

    (Monetary Policy and Research Department, Bank of Finland, Finland)

Abstract

This paper studies how the creation of (ex ante) benchmarks and rankings can be used to provide information in financial markets. Although an investor cannot precisely estimate the future returns of an entrepreneur’s projects, the investor can mitigate the incomplete information problem by comparing different entrepreneurs and financing only the very best ones. Incomplete information can be eliminated with certainty if the number of compared projects is sufficiently large. Because the possibility to make benchmarks and comparisons favours centralised information gathering, it creates a novel rationale for the establishment of a financial intermediary.

Suggested Citation

  • Juha-Pekka Niinimäki & Tuomas Takalo, 2007. "Benchmarking and Comparing Entrepreneurs with Incomplete Information," Finnish Economic Papers, Finnish Economic Association, vol. 20(2), pages 91-107, Autumn.
    • Handle: RePEc:fep:journl:v:20:y:2007:i:2:p:91-107
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    References listed on IDEAS

    as
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    Citations

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    Cited by:

    1. Tuomas Takalo, 2012. "Rationales and Instruments for Public Innovation Policies," Journal of Reviews on Global Economics, Lifescience Global, vol. 1, pages 157-167.
    2. repec:zbw:bofrdp:2010_022 is not listed on IDEAS
    3. repec:zbw:bofrdp:2013_001 is not listed on IDEAS
    4. Niinimäki, Juha-Pekka, 2010. "Moral hazard in the credit market when the collateral value is stochastic," Research Discussion Papers 22/2010, Bank of Finland.
    5. Niinimäki, Juha-Pekka, 2010. "Moral hazard in the credit market when the collateral value is stochastic," Bank of Finland Research Discussion Papers 22/2010, Bank of Finland.
    6. Tuomas Takalo, 2012. "Rationales and Instruments for Public Innovation Policies," Journal of Reviews on Global Economics, Lifescience Global, vol. 1, pages 157-167.

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    More about this item

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

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