Information Costs and the Organization of Credit Markets: A Theory of Indirect Lending
This paper explains indirect lending as a strategy for reducing a bank's cost of screening borrowers. Commercial banks appear to "ration" credit by rejecting some direct loan applicants, although they accept higher-risk borrowers who apply for loans indirectly through retailers. However, the more thorough credit check on direct loans causes applicants to sort themselves according to risk. Indirect applicants signal their higher risk through their choice of financing. Since banks gather more accurate information on direct applicants, the two types of contracts should differ in predictable ways. These implications are tested with Federal Reserve data on 5,000 automobile loans. Copyright 1990 by Oxford University Press.
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
Volume (Year): 28 (1990)
Issue (Month): 3 (July)
|Contact details of provider:|| Postal: |
Fax: 01865 267 985
Web page: http://ei.oupjournals.org/
More information through EDIRC
|Order Information:||Web: http://www.oup.co.uk/journals|
When requesting a correction, please mention this item's handle: RePEc:oup:ecinqu:v:28:y:1990:i:3:p:508-29. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Oxford University Press)or (Christopher F. Baum)
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.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with 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 profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.