The Impacts of Information Asymmetry in Determining Bank Spreads
affiliation not provided to SSRN
Emerson Fernandes Marçal
Mackenzie Presbyterian University ; Getulio Vargas Foundation (FGV) - Sao Paulo School of Economics
February 9, 2009
A large effort in research was made in order to assess which are the determining factors in bank spreads. Employing information asymmetry indicators based on the World Bank’s "Doing Business" survey, we aim to investigate the role that information asymmetry plays in bank spreads. The results found in this paper suggest that the existence of a lesser degree of information asymmetry in credit markets reduces bank spreads. This conclusion was obtained based on a study of prime loan rates. The effect would be between a 2% to 4% permanent reduction in spreads. It is argued that larger reductions could be obtained for other kinds of greater risk credit. The relation was obtained based on econometric panel data models with static effects and seems to be solid from the statistical viewpoint. Nonetheless, new studies involving larger samples should be performed in order to confirm this relationship.
Number of Pages in PDF File: 21
Keywords: spreads, panel data
JEL Classification: C23, E43working papers series
Date posted: December 6, 2011 ; Last revised: December 19, 2011
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