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Financial Intermediation with Proprietary Information


  • Sudipto Bhattacharya


I contrast equilibria in loan markets under bilateral bank- borrower relationships, in which proprietary technological knowledge of borrowers is not revealed to product-market competitors, with equilibria under multilateral financing which may lead to such knowledge being shared across product-market competitors. I examine the conditions for equilibrium existence, ex ante efficiency, and incentives to undertake privately-financed, costly knowledge-generating R&D, under these two differing institutional mechanisms for financing R&D-intensive investments by firms competing in product markets.

Suggested Citation

  • Sudipto Bhattacharya, 1992. "Financial Intermediation with Proprietary Information," CEPR Financial Markets Paper 0021, European Science Foundation Network in Financial Markets, c/o C.E.P.R, 77 Bastwick Street, London EC1V 3PZ..
  • Handle: RePEc:cpr:ceprfm:0021

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    References listed on IDEAS

    1. Avner Shaked & John Sutton, 1982. "Relaxing Price Competition Through Product Differentiation," Review of Economic Studies, Oxford University Press, vol. 49(1), pages 3-13.
    2. Douglas W. Diamond, 1984. "Financial Intermediation and Delegated Monitoring," Review of Economic Studies, Oxford University Press, vol. 51(3), pages 393-414.
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    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Doris Neuberger, 2005. "What’s Common to Relationship Banking and Relationship Investing? Reflections within the Contractual Theory of the Firm," Finance 0510001, EconWPA.
    2. Caminal, Ramon, 1997. "Financial intermediation and the optimal tax system," Journal of Public Economics, Elsevier, vol. 63(3), pages 351-382, February.
    3. Arnoud W.A. Boot & Anjolein Schmeits, 1996. "Market Discipline in Conglomerate Banks: Is an Internal Allocation of Cost of Capital Necessary as an Incentive Device?," Center for Financial Institutions Working Papers 96-39, Wharton School Center for Financial Institutions, University of Pennsylvania.
    4. Doris Neuberger, 2005. "What’s Common to Relationship Banking and Relationship Investing? Reflections within the Contractual Theory of the Firm," Finance 0510003, EconWPA.


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