IDEAS home Printed from https://ideas.repec.org/p/cdl/anderf/qt5r6003pq.html
   My bibliography  Save this paper

Loan Commitments and Credit Demand Uncertainty

Author

Listed:
  • Greenbaum, Stuart
  • Kanatas, George
  • Venezia, Itzhak

Abstract

We provide an explanation for loan commitments unrelated to borrower credit-worthiness. In our model, banks can use loan commitments to reduce uncertainty regarding their own future funding needs. Given a cost advantage to banks that can acquire such information, there exists an equilibrium demand for commitments by risk-neutral firms. The purchase of the loan commitment and the choice of contract terms reveals the buyer's private information regarding future credit needs. In order to ensure the sorting of the a priori indistinguishable applicants according to their private information, we show that a usage fee applied to the commitment-holder's unused credit line is necessary.

Suggested Citation

  • Greenbaum, Stuart & Kanatas, George & Venezia, Itzhak, 1990. "Loan Commitments and Credit Demand Uncertainty," University of California at Los Angeles, Anderson Graduate School of Management qt5r6003pq, Anderson Graduate School of Management, UCLA.
    • Handle: RePEc:cdl:anderf:qt5r6003pq
    as

    Download full text from publisher

    File URL: https://www.escholarship.org/uc/item/5r6003pq.pdf;origin=repeccitec
    Download Restriction: no
    ---><---

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cdl:anderf:qt5r6003pq. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Lisa Schiff (email available below). General contact details of provider: https://edirc.repec.org/data/aguclus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.