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Asymmetric Information and Moral Hazard in the SME Credit Market: The Case of Laleli

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  • Mehmet Maşuk Fidan

Abstract

Credit will be rationed in Markets with asymmetric information which seen as one of the most important examples of market failure. Asymmetric information creates two problems: Adverse selection and moral hazard. Adverse Selection occurs when the potential borrowers who are the most likely to produce an undesirable outcome are the ones who most actively seek out a loan and are thus most likely to be selected. Moral hazard occurs when the lender is subjected to the hazard that the borrower has incentives to engage in activities that are immoral and undesirable from the lender’s point of view, because these activities make it less likely that the loan will be paid back. We study the asymmetric information in credit market for SMEs in a Laleli context by mean of questionnaire. The purpose of this study is to define whether there is asymmetric information in credit market in Turkey or not. The results of survey (questionnaire) show that there is asymmetric information in SMEs credit market in a Laleli

Suggested Citation

  • Mehmet Maşuk Fidan, 2011. "Asymmetric Information and Moral Hazard in the SME Credit Market: The Case of Laleli," Journal of Finance Letters (Maliye ve Finans Yazıları), Maliye ve Finans Yazıları Yayıncılık Ltd. Şti., vol. 26(90), pages 41-57, January.
    • Handle: RePEc:acc:malfin:v:26:y:2011:i:90:p:41-57
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