Information disclosure and the choice between arm's-length and inside debt

• 成果类型: Article
• 署名作者: Agarwal, Sumit; Hauswald, Robert
• 署名单位: National University of Singapore; American University
• 刊物名称: JOURNAL OF MONETARY ECONOMICS
• ISSN/ISSBN: 0304-3932
• DOI: 10.1016/j.jmoneco.2020.08.001
• 发表日期: 2021
• 关键词: Information disclosure; Debt type; Credit screening; Information content

摘要

To study the consequences of information disclosure on economic exchange, we compare the differential information content of in-person (inside) and online (arm's-length) loans. Confidential disclosures crucially shape the strategic dynamics of bank-borrower interaction and lead to trade-offs between the availability and pricing of credit. Inside debt carries higher interest but is more readily available whereas the opposite holds true for arm'slength loans. Anticipating the bank's use of inside information, firms strategically disclose information and switch lenders, which ultimately affects default. The observed availability-price trade-off corresponds to a novel mechanism for mitigating adverse selection relying on self-selection and disclosure. (C) 2020 Elsevier B.V. All rights reserved.