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The Loan Contract: Mechanism of Financial Control

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  • Pecchenino, Rowena A

Abstract

In this paper, it is shown that an industry bank specializing in the financial needs of an indust ry can effect industry control in a variety of economic situations. S pecifically, a bank, through its loan contract, can set industry outp ut at the monopoly level and extract surplus from collusion if the fi rms in the industry cannot collude directly because of asymmetric inf ormation, signalling problems, and/or antitrust restrictions. Copyright 1988 by Royal Economic Society.

Suggested Citation

  • Pecchenino, Rowena A, 1988. "The Loan Contract: Mechanism of Financial Control," Economic Journal, Royal Economic Society, vol. 98(389), pages 126-137, March.
    • Handle: RePEc:ecj:econjl:v:98:y:1988:i:389:p:126-37
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    Cited by:

    1. Hester,D.D., 1998. "Credit flows from banks and capital markets in an evolving Europe," Working papers 16, Wisconsin Madison - Social Systems.
    2. Gérard Mondello, 1990. "Note sur un modèle dynamique de rationnement du crédit," Revue Économique, Programme National Persée, vol. 41(1), pages 119-134.

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