Bank-firm relationships, competition and asymmetric information

Thesis Defence
"Bank-firm relationships, competition and asymmetric information"

Nicolas Taillet, PhD candidate in the PhD programme ESCP, publicly defended his PhD thesis in Management Sciences.

20 September 2022
ESCP Business School Campus République

Abstract

In the first article, we show, using a theoretical model, that information generated by banks can lead to credit rationing if borrowers have imperfect information about their lender’s type. Indeed, to be recognized by firms as information generating banks, the banks need to display low portfolio default rate, which can only happen if they exclude risky borrowers.

In the second article, we change perspective and analyze asymmetric information banks generate about firms as well as across banks. We investigate how banks use the information they generate during a lending relationship. We show theoretically that informed banks can unload part of their exposure to uninformed banks when anticipating a borrower's default. We confirm this effect empirically and note that this effect is prevalent for firms, for which the public information has not yet deteriorated, i.e. for which the difference between private and public information is the largest.

Finally, in the third article, we empirically show that, in regions where bank competition is lower, firms require more banks to join their bank pool in order to create additional competition. This suggests that firms can strategically generate bank competition in order to reduce banks' bargaining power.

Jury