Most important decision problems—virtually all capital investments and planning situations—involve risky cash flows with uncertainties that are resolved over time. In most of these problems, the decision-maker has access to financial markets and may borrow and lend to smooth consumption over time. Yet, because of the difficulty of incorporating these borrowing and lending decisions into the eva...

I analyze banks’ incentives to acquire expertise in judging the credit-worthiness of borrowers in an industry with uncertain business conditions. The optimal industrial organization of bank lending features several banks with industry expertise, as well as a competitive fringe of banks without such expertise. The analysis provides a foundation for analyzing the relative merits of focus vs. dive...

Using detailed data of all German banks, we find that banks which have suffered heavy credit losses reduce their corporate lending business by 1.32 euro for each lost; with 95% confidence, the effect is between 0.85 and 1.80 euros. This sensitivity in line (quite heterogeneous) results earlier studies but significantly lower than those arising from assumption constant leverage. Weakly capitaliz...

Abstract We propose a macroeconomic model in which adverse selection investment amplifies fluctuations, line with the prominent role played by credit crunch during financial crisis. Endogenous lending standards emerge due to an informational asymmetry between borrowers and lenders about riskiness of borrowers. By using loan approval probability as screening device, banks ration following increa...

The rise of online P2P lending, as a novel economic lending model, brings new opportunities and challenges for the research of credit risk evaluation. This paper aims to mine information from different data sources to improve the performance of credit risk evaluation models. Be-sides the personal financial and demographic data used in traditional models, the authors collect in-formation from (1...

2 Introduction 3 1. The Bank Lending Channel 4 1.1 Interest Rate and Credit Channels: a Brief Overview of Theoretical Concepts 4 1.2 Determinants of the Bank Lending Channel 6 2. A Short Description of Latvia's Banking Sector 7 2.1 Importance of the Banking Sector for Latvia's Financial System 7 2.2 Structure of Latvia's Banking Sector 8 3. Discovering Asymmetries in Bank Lending Behaviour 12 3...