Dysfunctional Finance : Positive Shocks and Negative Outcomes

• Tác giả: Karla Hoff
• Ngôn ngữ: eng
• Ký hiệu phân loại: 658.1 Organization and finance
• Thông tin xuất bản: 2012
• Bộ sưu tập: Tài liệu truy cập mở
• ID: 314303
• Chủ đề: 1. Asymmetric and Private Information D820; 2. Banks; 3. Micro Finance Institutions; 4. Mortgages G210; 5. Other Depository Institutions

Tóm tắt

n financial markets with asymmetric information about mean returns, borrowers with different default risks may pay the same rate of interest. If they do, the marginal borrower will have a high-risk, negative-value project. Under some conditions, technological change that increases each entrepreneur's output will attract a new set of negative-value projects. This adverse selection process will erode the ability rents of the inframarginal borrowers. I present an example in which it destroys the market. The results imply that a boom in a sector can lead to a crisis if institutional change to solve the screening problem does not occur.