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Adverse selection, endogenous borrowing constraints and firm growth

  • Fishman, Arthur
  • Krausz, Miriam
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    If banks face asymmetric information about loan quality, endogenous borrowing constraints which restrict the size of new firms may emerge in equilibrium. High quality firms reduce financing costs by starting off small and increasing their size over time.

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    File URL: http://www.sciencedirect.com/science/article/B6V84-506J0FG-1/2/ee7aa94021a64e9ced4065be8b69bc56
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    Article provided by Elsevier in its journal Economics Letters.

    Volume (Year): 108 (2010)
    Issue (Month): 2 (August)
    Pages: 219-221

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    Handle: RePEc:eee:ecolet:v:108:y:2010:i:2:p:219-221
    Contact details of provider: Web page: http://www.elsevier.com/locate/ecolet

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    1. Padilla, Atilano Jorge & Pagano, Marco, 1996. "Endogenous Communication Among Lenders and Entrepreneurial Incentives," CEPR Discussion Papers 1295, C.E.P.R. Discussion Papers.
    2. Rui Albuquerque & Hugo A. Hopenhayn, 2004. "Optimal Lending Contracts and Firm Dynamics," Review of Economic Studies, Wiley Blackwell, vol. 71(2), pages 285-315, 04.
    3. Gian Luca Clementi & Hugo Hopenhayn, 2002. "A Theory of Financing Constraints and Firm Dynamics," RCER Working Papers 492, University of Rochester - Center for Economic Research (RCER).
    4. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
    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.
    6. Rafael Rob & Arthur Fishman, 2005. "Is Bigger Better? Customer Base Expansion through Word-of-Mouth Reputation," Journal of Political Economy, University of Chicago Press, vol. 113(5), pages 1146-1175, October.
    7. Fishman, Arthur & Rob, Rafael, 2003. "Consumer inertia, firm growth and industry dynamics," Journal of Economic Theory, Elsevier, vol. 109(1), pages 24-38, March.
    8. Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, vol. 50(3), pages 649-70, May.
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