Abstract
Original language | English |
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Pages (from-to) | 275-296 |
Number of pages | 22 |
Journal | Journal of Economic Behavior and Organization |
Volume | 157 |
Early online date | 6 Jan 2018 |
DOIs | |
Publication status | Published - 1 Jan 2019 |
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Keywords
- corporate loans
- interest rate clustering,
- information asymmetry
- uncertainty
Cite this
Clustered Pricing in the Corporate Loan Market: Theory and Empirical Evidence. / Chaudhry, Sajid Mukhtar ; Bajoori, Elnaz; Nandeibam, Shasikanta.
In: Journal of Economic Behavior and Organization, Vol. 157, 01.01.2019, p. 275-296.Research output: Contribution to journal › Article
}
TY - JOUR
T1 - Clustered Pricing in the Corporate Loan Market:
T2 - Theory and Empirical Evidence
AU - Chaudhry, Sajid Mukhtar
AU - Bajoori, Elnaz
AU - Nandeibam, Shasikanta
PY - 2019/1/1
Y1 - 2019/1/1
N2 - Existing theories explaining security price clustering as well as clustering in the retail deposit and mortgage markets are incompatible with the clustering in the corporate loan market. We develop a new theoretical model that the attitude of the lender toward the uncertainty about the quality of the borrower leads to the clustering of spreads. Our empirical results support our theoretical model and we find that clustering increases with the degree of uncertainty between the lender and the borrower. In contrast, clustering is less likely when the uncertainty about the quality of the borrower has been reduced through repeated access and through prior interactions of the lender and the borrower.
AB - Existing theories explaining security price clustering as well as clustering in the retail deposit and mortgage markets are incompatible with the clustering in the corporate loan market. We develop a new theoretical model that the attitude of the lender toward the uncertainty about the quality of the borrower leads to the clustering of spreads. Our empirical results support our theoretical model and we find that clustering increases with the degree of uncertainty between the lender and the borrower. In contrast, clustering is less likely when the uncertainty about the quality of the borrower has been reduced through repeated access and through prior interactions of the lender and the borrower.
KW - corporate loans
KW - interest rate clustering,
KW - information asymmetry
KW - uncertainty
U2 - 10.1016/j.jebo.2017.12.019
DO - 10.1016/j.jebo.2017.12.019
M3 - Article
VL - 157
SP - 275
EP - 296
JO - Journal of Economic Behavior and Organization
JF - Journal of Economic Behavior and Organization
SN - 0167-2681
ER -