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Borrower poaching and information display in credit markets

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  • Degryse, Hans
  • Bouckaert, B

Abstract

The Riegle-Neal Act in the US and the Economic and Monetary Union in Europe are recent initiatives to stimulate financial integration. These initiatives allow new entrants to ‘poach’ the incumbents' clients by offering them attractive loan offers. We show that these deregulations may be insufficient since asymmetric information seriously hampers the integration of credit markets. This asymmetry stems from the informational advantage incumbent banks have about their current clients vis-a-vis potential entrants. Moreover, banks may strategically display some information, hindering entry when asymmetric information is moderate. We also show that voluntary information sharing emerges only when asymmetric information is low.

(This abstract was borrowed from another version of this item.)

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Bibliographic Info

Paper provided by Katholieke Universiteit Leuven in its series Open Access publications from Katholieke Universiteit Leuven with number urn:hdl:123456789/103656.

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Date of creation: 2001
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Handle: RePEc:ner:leuven:urn:hdl:123456789/103656

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Web page: http://www.kuleuven.be

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Keywords: Credit; Information; Market; Markets;

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References

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  1. Jappelli, Tullio & Pagano, Marco, 1991. "Information Sharing in Credit Markets," CEPR Discussion Papers 579, C.E.P.R. Discussion Papers.
  2. Diamond, Douglas W, 1991. "Monitoring and Reputation: The Choice between Bank Loans and Directly Placed Debt," Journal of Political Economy, University of Chicago Press, vol. 99(4), pages 689-721, August.
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  4. J. Miguel Villas-Boas & Udo Schmidt-Mohr, 1999. "Oligopoly with Asymmetric Information: Differentiation in Credit Markets," RAND Journal of Economics, The RAND Corporation, vol. 30(3), pages 375-396, Autumn.
  5. Tullio Jappelli & Marco Pagano, 1999. "Information Sharing, Lending and Defaults: Cross-Country Evidence," CSEF Working Papers 22, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
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  7. Gehrig, Thomas, 1998. "Screening, cross-border banking, and the allocation of credit," Research in Economics, Elsevier, vol. 52(4), pages 387-407, December.
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  15. Farinha, Luisa A. & Santos, Joao A. C., 2002. "Switching from Single to Multiple Bank Lending Relationships: Determinants and Implications," Journal of Financial Intermediation, Elsevier, vol. 11(2), pages 124-151, April.
  16. Padilla, A Jorge & Pagano, Marco, 1997. "Endogenous Communication among Lenders and Entrepreneurial Incentives," Review of Financial Studies, Society for Financial Studies, vol. 10(1), pages 205-36.
  17. DANIEL B. KLElN, 1992. "Promise Keeping In The Great Society: A Model Of Credit Information Sharing," Economics and Politics, Wiley Blackwell, vol. 4(2), pages 117-136, 07.
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Cited by:
  1. Degryse, H.A. & Ongena, S., 2002. "Distance, Lending Relationships and Competition," Discussion Paper 2002-16, Tilburg University, Center for Economic Research.
  2. Degryse, Hans & Ongena, S, 2002. "Bank-firm relationships and international banking markets," Open Access publications from Katholieke Universiteit Leuven urn:hdl:123456789/121629, Katholieke Universiteit Leuven.
  3. Tassel, Eric Van, 2006. "Relationship lending under asymmetric information: A case of blocked entry," International Journal of Industrial Organization, Elsevier, vol. 24(5), pages 915-929, September.
  4. Mannonen, Pekka, 2002. "The Strategic Response of Banks to an Exogenous Positive Information Shock in the Credit Markets," Discussion Papers 830, The Research Institute of the Finnish Economy.

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