TY - JOUR
T1 - Learning from a rival bank and lending boom
AU - Ogura, Yoshiaki
N1 - Copyright:
Copyright 2006 Elsevier B.V., All rights reserved.
PY - 2006/10
Y1 - 2006/10
N2 - When bankers observe a rival winning in the interbank competition for lending to a firm, they infer that the firm may be more promising than they had thought. From this consideration, they loosen their creditworthiness tests and lower the interest rates they offer in the next lending competition for the firm. Increased interbank competition reduces the impact of this observational learning and decreases the credit risk taken by each bank because of a severe winner's curse, while it increases the aggregate risk taken by the entire banking sector.
AB - When bankers observe a rival winning in the interbank competition for lending to a firm, they infer that the firm may be more promising than they had thought. From this consideration, they loosen their creditworthiness tests and lower the interest rates they offer in the next lending competition for the firm. Increased interbank competition reduces the impact of this observational learning and decreases the credit risk taken by each bank because of a severe winner's curse, while it increases the aggregate risk taken by the entire banking sector.
KW - Financial liberalization
KW - Interbank competition
KW - Learning
KW - Winner's curse
UR - http://www.scopus.com/inward/record.url?scp=33748773946&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=33748773946&partnerID=8YFLogxK
U2 - 10.1016/j.jfi.2005.10.002
DO - 10.1016/j.jfi.2005.10.002
M3 - Article
AN - SCOPUS:33748773946
VL - 15
SP - 535
EP - 555
JO - Journal of Financial Intermediation
JF - Journal of Financial Intermediation
SN - 1042-9573
IS - 4
ER -