Credit Rationing and Internal Ratings in the face of Innovation and Uncertainty
Some empirical investigations are pointing to the fact that high-tech firms are subject to credit rationing to a higher extent than the average. This excess of credit rationing may not be due to information asymmetries, but rather to the inability of credit institutions to screen projects in novel fields. This article provides a model of this phenomenon and explores its implications in the light of recent changes in the screening procedures of major banks. In particular, the changes to be made in order to comply with the ``Basel II'' accord emphasize the impact of screening procedures on credit rationing.
|Date of creation:||28 Apr 2005|
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|Note:||Type of Document - pdf; pages: 22. Submitted to 'Economic Notes'|
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