Bhaumik, Sumon
Investment, incentive and credit: does the government matter? - 1998 - p.263-75 - Jul-Dec
The literature on banking and credit has, among other things, focused on credit allocations made by banks in the presence of asymmetric information and the resultant moral hazard and adverse selection problems. However, it is not obvious that in a free market with no information-related problems and uncertainly, net-revenue-maximizing banks will have zero excess reserves in equilibrium and/or provide credit to a large number of projects. The paper shows that the government might be able to affect both the size and the distribution of credit disbursals with the help of tax cuts. It also charts out a case in favour of closer bank-firm relationship as in the classical German-Japanese paradigm. - Reproduced
Banks
Investment, incentive and credit: does the government matter? - 1998 - p.263-75 - Jul-Dec
The literature on banking and credit has, among other things, focused on credit allocations made by banks in the presence of asymmetric information and the resultant moral hazard and adverse selection problems. However, it is not obvious that in a free market with no information-related problems and uncertainly, net-revenue-maximizing banks will have zero excess reserves in equilibrium and/or provide credit to a large number of projects. The paper shows that the government might be able to affect both the size and the distribution of credit disbursals with the help of tax cuts. It also charts out a case in favour of closer bank-firm relationship as in the classical German-Japanese paradigm. - Reproduced
Banks