Informal Financial Networks: Theory and Evidence
AbstractWe develop a model of informal financial networks and present corroborating evidence by studying the role of professional property brokers in the U.S. commercial real estate market. Our model demonstrates how service intermediaries, who do not supply finance themselves, can facilitate their clients' access to finance via repeated informal relationships with lenders. Empirically, we find that, controlling for endogenous broker selection, hiring a broker strikingly increases the probability of obtaining a bank loan from 40 to 58 percent. Our results demonstrate that even in the U.S., with its well-developed capital markets, informal networks play an important role in controlling access to finance.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8874.
Date of creation: Apr 2002
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Publication status: published as Garmaise, Mark and Tobias J. Moskowitz. “Informal Financial Networks: Theory and Evidence." Review of Financial Studies 16, 4 (2003): 1007-1040.
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- G2 - Financial Economics - - Financial Institutions and Services
- G3 - Financial Economics - - Corporate Finance and Governance
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