Flight to Quality or to Captivity?: Information and Credit Allocation

Superior information exchanged over the course of lending relationships generates bank-client specificities to the extent that such information cannot be communicated credibly to outsiders. Consequently, banks obtain higher profits from more captured borrowers than from borrowers with financing alte...

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Bibliographic Details
Main Author: Dell'Ariccia, Giovanni (Author)
Format: Electronic eBook
Language:English
Published: Washington, D.C International Monetary Fund 2001
Series:IMF Working Papers Working Paper No. 01/20
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Summary:Superior information exchanged over the course of lending relationships generates bank-client specificities to the extent that such information cannot be communicated credibly to outsiders. Consequently, banks obtain higher profits from more captured borrowers than from borrowers with financing alternatives. We refer to this as a "flight to captivity" effect. Negative shocks, associated with monetary contractions or foreign entry, cause a reallocation of bank credit away from more transparent borrowers and toward more opaque, more captured borrowers. The paper applies these ideas to the analysis of bank behavior in transition economies after financial liberalization and monetary policy contractions
Physical Description:1 Online-Ressource (25 p)
ISBN:1451843844
9781451843842

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