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Inter-Company Matching and the Supply of Informed Capital

48 Pages Posted: 10 Feb 2012 Last revised: 24 Jan 2015

Fernando Anjos

NOVA School of Business and Economics

Alejandro Drexler

Federal Reserve Bank of Chicago

Date Written: December 19, 2014

Abstract

We model an economy where it is beneficial for high-type organizations to collaborate with other high types, and where this assortative-matching pattern allows informed financiers to provide inexpensive funds to partner companies of their high-type ventures. The expected funding benefit associated with finding high-type partners increases in the supply of informed capital, which creates an additional incentive for high types to search. Our main result is that, in such a setting, a critical mass of informed capital is sometimes required for an efficient equilibrium to obtain. We provide a novel channel for how the financial sector can impact real outcomes, specifically by affecting matching patterns.

Keywords: financial intermediation, matching, venture capital

JEL Classification: D20, D80, G24, G32, L20

Suggested Citation

Anjos, Fernando and Drexler, Alejandro, Inter-Company Matching and the Supply of Informed Capital (December 19, 2014). Journal of Economic Behavior and Organization, Vol. 111, 2015. Available at SSRN: https://ssrn.com/abstract=2002287 or http://dx.doi.org/10.2139/ssrn.2002287

Fernando Anjos (Contact Author)

NOVA School of Business and Economics ( email )

Campus de Campolide
Lisbon, 1099-032
Portugal

HOME PAGE: http://sites.google.com/site/fernandoanjossite/

Alejandro Drexler

Federal Reserve Bank of Chicago ( email )

230 S La salle St, Chicago
Austin, IL 60604
United States

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