Information losses in a dynamic model of credit
Article Abstract:
This paper examines dynamic information losses associated with loan terminations. We assume that the aggregated returns of current borrowers contain information about the mean returns to future borrowers. In a competitive loan market, the value of this information is not fully internalized by individual borrowers and lenders, and loan decisions fail to be first best. Introducing heterogeneous borrowers, who know their own risk characteristics better than lenders, safer borrowers are less willing to borrow when risk premia rise. As they cease borrowing, the information generated in credit markets becomes noisier and this tends to increase risk premia. The model produces alternating and persistent periods of "tight" and "loose" credit. (Reprinted by permission of the publisher.)
Publication Name: Journal of Finance
Subject: Business
ISSN: 0022-1082
Year: 1989
User Contributions:
Comment about this article or add new information about this topic:
Do managerial motives influence firm risk reduction strategies?
Article Abstract:
This article finds evidence consistent with the hypothesis that managers consider personal risk when making decisions that affect firm risk. I find that Chief Executive Officers (CEOs) with more personal wealth vested in firm equity tend to diversify. CEOs who are specialists at the existing technology tend to buy similar technologies. When specialists have many years vested, they tend to diversity, however. Poor performance in the existing lines of business is associated with movements into new lines of business. (Reprinted by permission of the publisher.)
Publication Name: Journal of Finance
Subject: Business
ISSN: 0022-1082
Year: 1995
User Contributions:
Comment about this article or add new information about this topic:
- Abstracts: The impact of derivatives on firm risk: an empirical examination of new derivative users. Conjectures regarding empirical managerial accounting research
- Abstracts: Common stochastic trends in a system of exchange rates. The exchange rate in the presence of transaction costs: implications for tests of purchasing power parity
- Abstracts: Valuation of risky assets in arbitrage free economies with frictions. A discrete time option model dependent on expected return: a note
- Abstracts: Valuation of risky assets in arbitrage free economies with frictions. part 2 Reference variables, factor structure, and the approximate multibeta representation
- Abstracts: The concept of 'impartition' policies: a different approach to vertical integration strategies. Piggybacking strategies for nonprofits: a shared costs approach