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Information externalities in the credit market and the spell of credit rationing

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  • Albertazzi, Ugo
  • Bottero, Margherita
  • Sene, Gabriele

Abstract

We present the first empirical study of loan searching strategies and loan granting decisions in a context where banks observe whether applicants have unsuccessfully applied for credit to other lenders in the past. Our identification strategy benefits from the use of granular data on loan applications and exploits the fact that evaluating lenders observe only the rejections received by a borrower up to six months before the current application. We document that past rejections diminish the probability of approval and increase the probability that a loan search is interrupted.

Suggested Citation

  • Albertazzi, Ugo & Bottero, Margherita & Sene, Gabriele, 2017. "Information externalities in the credit market and the spell of credit rationing," Journal of Financial Intermediation, Elsevier, vol. 30(C), pages 61-70.
  • Handle: RePEc:eee:jfinin:v:30:y:2017:i:c:p:61-70
    DOI: 10.1016/j.jfi.2016.09.004
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    References listed on IDEAS

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    More about this item

    Keywords

    Sequential lending decisions; Credit supply; Winner’s curse; Informational spillover;

    JEL classification:

    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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