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Borrower Poaching and Information Display in Credit Markets

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  • Bouckaert, Jan
  • Degryse, Hans

Abstract

The Riegle-Neal Act in the US and the Economic and Monetary Union in Europe are recent initiatives to stimulate financial integration. These initiatives allow new entrants to ‘poach’ the incumbents' clients by offering them attractive loan offers. We show that these deregulations may be insufficient since asymmetric information seriously hampers the integration of credit markets. This asymmetry stems from the informational advantage incumbent banks have about their current clients vis-a-vis potential entrants. Moreover, banks may strategically display some information, hindering entry when asymmetric information is moderate. We also show that voluntary information sharing emerges only when asymmetric information is low.

Suggested Citation

  • Bouckaert, Jan & Degryse, Hans, 2001. "Borrower Poaching and Information Display in Credit Markets," CEPR Discussion Papers 2936, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:2936
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    References listed on IDEAS

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    Cited by:

    1. Verónica Balzarotti & Alejandra Anastasi, 2013. "Does Competition for Novice Borrowers Hurt Access to Finance? An Analysis in a Context of High Risk and Low Outreach," Ensayos Económicos, Central Bank of Argentina, Economic Research Department, vol. 1(69), pages 101-149, December.
    2. Hans Degryse & Steven Ongena, 2005. "Distance, Lending Relationships, and Competition," Journal of Finance, American Finance Association, vol. 60(1), pages 231-266, February.
    3. Hans Degryse & Steven Ongena, 2002. "Bank-Firm Relationships and International Banking Markets," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 9(3), pages 401-417.
    4. Mannonen, Pekka, 2002. "The Strategic Response of Banks to an Exogenous Positive Information Shock in the Credit Markets," Discussion Papers 830, The Research Institute of the Finnish Economy.

    More about this item

    Keywords

    asymmetric information; banking competition; barriers to entry; financial integration;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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