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http://ssrn.com/abstract=306408
 
 

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Informal Financial Networks: Theory and Evidence


Mark J. Garmaise


University of California, Los Angeles (UCLA) - Anderson School of Management

Tobias J. Moskowitz


University of Chicago - Booth School of Business

April 2002

NBER Working Paper No. w8874

Abstract:     
We develop a model of informal financial networks and present corroborating evidence by studying the role of professional property brokers in the U.S. commercial real estate market. Our model demonstrates how service intermediaries, who do not supply finance themselves, can facilitate their clients' access to finance via repeated informal relationships with lenders. Empirically, we find that, controlling for endogenous broker selection, hiring a broker strikingly increases the probability of obtaining a bank loan from 40 to 58 percent. Our results demonstrate that even in the U.S., with its well-developed capital markets, informal networks play an important role in controlling access to finance.

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Date posted: April 4, 2002  

Suggested Citation

Garmaise, Mark J. and Moskowitz, Tobias J., Informal Financial Networks: Theory and Evidence (April 2002). NBER Working Paper No. w8874. Available at SSRN: http://ssrn.com/abstract=306408

Contact Information

Mark J. Garmaise
University of California, Los Angeles (UCLA) - Anderson School of Management ( email )
110 Westwood Plaza
Los Angeles, CA 90095-1481
United States
Tobias J. Moskowitz (Contact Author)
University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-834-2757 (Phone)
773-702-0458 (Fax)
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