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| Author: | Bofondi, M. Gobbi, G. |
| Title: | Informational barriers to entry into credit markets |
| Journal: | Review of finance
2006 : VOL. 10:1, p. 39-67 |
| Index terms: | asymmetric information credit markets entry conditions Italy |
| Language: | eng |
| Abstract: | Economic theory suggests that asymmetric information between incumbents and entrants can generate barriers to entry into credit markets. Incumbents have superior information about their own customers and the overall economic conditions of the local credit market. This implies that entrants are likely to experience higher loan default rates than the incumbents. These theoretical predictions are tested using a unique database of over 7000 observations on 729 individual banks' lending in 95 Italian local markets. It is found that informational asymmetries play a significant role in explaining entrants' loan default rates. |
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