IDEAS home Printed from https://ideas.repec.org/a/bla/jfinan/v37y1982i3p717-39.html

An Exploration of Competitive Signalling Equilibria with "Third Party" Information Production: The Case of Debt Insurance

Author

Listed:
  • Thakor, Anjan V

Abstract

In markets in which sellers know more about product quality than buyers, but cannot convey their superior information either by directly issuing costly signals of the Spence type or by successfully funding the production of information, I suggest another way in which the informational asymmetry problem can be resolved; a third party can produce the necessary information at a cost and use it to price a service consumed by the sellers. Buyers can then observe a seller's choice of service consumption level and be well informed in equilibrium. In this framework I construct a model in which a borrower's choice of insurance coverage signals its default probability to lenders, and explore the properties of the resulting signalling equilibrium in a variety of cases.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Thakor, Anjan V, 1982. "An Exploration of Competitive Signalling Equilibria with "Third Party" Information Production: The Case of Debt Insurance," Journal of Finance, American Finance Association, vol. 37(3), pages 717-739, June.
    • Handle: RePEc:bla:jfinan:v:37:y:1982:i:3:p:717-39
    as

    Download full text from publisher

    File URL: http://links.jstor.org/sici?sici=0022-1082%28198206%2937%3A3%3C717%3AAEOCSE%3E2.0.CO%3B2-A&origin=repec
    File Function: full text
    Download Restriction: Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or

    for a different version of it.

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Gautam Goswami & Martin Grace & Michael Rebello, 2008. "Experimental evidence on coverage choices and contract prices in the market for corporate insurance," Experimental Economics, Springer;Economic Science Association, vol. 11(1), pages 67-95, March.
    2. Kimberly Cornaggia & John Hund & Giang Nguyen, 2024. "The Price of Safety: The Evolution of Municipal Bond Insurance Value," Management Science, INFORMS, vol. 70(4), pages 2330-2354, April.
    3. Lee, Wayne L & Thakor, Anjan V & Vora, Gautam, 1983. "Screening, Market Signalling, and Capital Structure Theory," Journal of Finance, American Finance Association, vol. 38(5), pages 1507-1518, December.
    4. Khoo, Shee-Yee & Klein, Paul-Olivier, 2025. "Islamic bonds ratings and the price of risk," Journal of Corporate Finance, Elsevier, vol. 93(C).
    5. Sung, Jaeyoung, 1997. "Corporate Insurance and Managerial Incentives," Journal of Economic Theory, Elsevier, vol. 74(2), pages 297-332, June.
    6. Agrawal, Ashwini & Kim, Daniel, 2021. "Municipal bond insurance and the U.S. drinking water crisis," LSE Research Online Documents on Economics 118888, London School of Economics and Political Science, LSE Library.
    7. Stuart I. Greenbaum & Anjan V. Thakor, 2004. "Bank Funding Modes," Finance 0411052, University Library of Munich, Germany.
    8. Kirstein Annette & Kirstein Roland & Gerhard Hans, 2010. "Bad Debt Loss Insurance in Settlement and Litigation," Review of Law & Economics, De Gruyter, vol. 6(1), pages 107-124, May.
    9. Park, Min, 2018. "What drives corporate insurance demand? Evidence from directors' and officers' liability insurance in Korea," Journal of Corporate Finance, Elsevier, vol. 51(C), pages 235-257.
    10. Chong Zhang & Man Yu & Jian Chen, 2022. "Signaling Quality with Return Insurance: Theory and Empirical Evidence," Management Science, INFORMS, vol. 68(8), pages 5847-5867, August.
    11. Brown, Craig O., 2017. "The politics of government financial management: Evidence from state bonds," Journal of Monetary Economics, Elsevier, vol. 90(C), pages 158-175.
    12. Gore, Angela K & Sachs, Kevin & Trzcinka, Charles, 2004. "Financial Disclosure and Bond Insurance," Journal of Law and Economics, University of Chicago Press, vol. 47(1), pages 275-306, April.
    13. Martin Eling & Ruo Jia & Jieyu Lin & Casey Rothschild, 2022. "Technology heterogeneity and market structure," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 89(2), pages 427-448, June.
    14. Chenyu Shan & Dragon Yongjun Tang & Wenya Wang, 2025. "Outsourcing Bank Loan Screening: The Economics of Third‐Party Loan Guarantees," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 57(8), pages 2003-2042, December.
    15. Roger D. Stover & Mark F. Schmitz, 1997. "Private Information in Bank Certification:Evidence from U.S. and Non-U.S. Bank Standby Letters of Credit," Multinational Finance Journal, Multinational Finance Journal, vol. 1(4), pages 309-324, December.
    16. Dario Cestau & Burton Hollifield & Dan Li & Norman Schürhoff, 2019. "Municipal Bond Markets," Annual Review of Financial Economics, Annual Reviews, vol. 11(1), pages 65-84, December.
    17. Natee Amornsiripanitch, 2022. "Bond Insurance and Public Sector Employment," Working Papers 22-03, Federal Reserve Bank of Philadelphia.
    18. Lang (Kate) Yang & Ruth Winecoff, 2022. "Municipal bond sectoral risk and information intermediation in uncertain times: Evidence from the Covid‐19 pandemic," Public Budgeting & Finance, Wiley Blackwell, vol. 42(4), pages 34-53, December.
    19. Timothy Riddiough, 2001. "Intermediation, Standardization and Learning in Financial Markets: Some Evidence and Implications," Wisconsin-Madison CULER working papers 01-09, University of Wisconsin Center for Urban Land Economic Research.
    20. Xueying Zhang & Shansheng Gao & Jian Jiao, 2018. "Moral Hazard Effects of Corporate Bond Guarantee Purchases: Empirical Evidence from China," Journal of Economics and Behavioral Studies, AMH International, vol. 10(5), pages 100-115.
    21. Amornsiripanitch, Natee, 2022. "The real effects of municipal bond insurance market disruptions11This paper was previous circulated with the title “Bond Insurance and Public Sector Employment.” I thank Gary Gorton, Andrew Metrick, Heather Tookes, William English, Paul Goldsmith-Pin," Journal of Corporate Finance, Elsevier, vol. 75(C).

    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:bla:jfinan:v:37:y:1982:i:3:p:717-39. 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: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/afaaaea.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.