search query: @author Padilla, A.J. / total: 3
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| Author: | Manove, M. Padilla, A.J. Pagano, M. |
| Title: | Collateral versus project screening: A model of lazy banks |
| Journal: | RAND Journal of Economics
2001 : WINTER, VOL. 32:4, p. 726-744 |
| Index terms: | Economic theory Industries Banking Credit Debt Models |
| Language: | eng |
| Abstract: | Many economists argue that the primary economic function of banks is to provide cheap credit and to facilitate this function, they advocate the strict protection of creditor rights. However, banks can serve another important economic function: by screening projects they can reduce the number of project failures and thus mitigate their private and social costs. This article shows that due to market imperfections in the banking industry, strong creditor protection may lead to market equilibria in which cheap credit is inappropriately emphasized over project screening. Restrictions on collateral requirements and protection of debtors in bankruptcy may redress this imbalance and increase credit-market efficiency. |
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