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Secret Keeping Intermediaries

Listed author(s):
  • Guillermo Ordonez

    (Yale University)

  • Gary Gorton

    (Yale School of Management)

  • Tri Vi Dang

    (University of Mannheim)

Information is critical to reallocate funds efficiently. However, this same information may also hinder liquidity by raising the concerns of adverse selection. When lending and liquidity provision are separated activities, individuals that produce information to lend do not internalize its negative externality on the liquidity properties of those loans. Financial intermediaries can eliminate this effect by hiding the information. If this is not possible, still intermediaries can internalize the negative effects of information by weighting in the benefits of liquidity.

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File URL: https://economicdynamics.org/meetpapers/2012/paper_402.pdf
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Paper provided by Society for Economic Dynamics in its series 2012 Meeting Papers with number 402.

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Date of creation: 2012
Handle: RePEc:red:sed012:402
Contact details of provider: Postal:
Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA

Web page: http://www.EconomicDynamics.org/
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