Borrower Poaching and Information Display in Credit Markets

29 Pages Posted: 18 Sep 2001

See all articles by Hans Degryse

Hans Degryse

KU Leuven, Department Accounting, Finance and Insurance; Centre for Economic Policy Research (CEPR)

Jan Bouckaert

University of Antwerp - Department of Economics

Date Written: September 2001

Abstract

The Riegle-Neal Act in the US and the Economic and Monetary Union in Europe are recent initiatives to stimulate financial integration. These initiatives allow new entrants to 'poach' the incumbents' clients by offering them attractive loan offers. We show that this deregulation may be insufficient since asymmetric information seriously hampers the integration of credit markets. This asymmetry stems from the informational advantage incumbent banks have about their current clients vis-a-vis potential entrants. Moreover, banks may strategically display some information, hindering entry when asymmetric information is moderate. We also show that voluntary information sharing emerges only when asymmetric information is low.

Keywords: Asymmetric information, banking competition, barriers to entry, financial integration

JEL Classification: D43, G21, L13

Suggested Citation

Degryse, Hans and Bouckaert, Jan, Borrower Poaching and Information Display in Credit Markets (September 2001). CEPR Discussion Paper No. 2936. Available at SSRN: https://ssrn.com/abstract=283253

Hans Degryse

KU Leuven, Department Accounting, Finance and Insurance ( email )

Naamsestraat 69
Leuven, B-3000
Belgium

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Jan Bouckaert (Contact Author)

University of Antwerp - Department of Economics ( email )

Prinsstraat 13
Antwerp, B-2000
Belgium
+32 3 220 4055 (Phone)

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