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Asymmetric information, credit market and the optimal regulation of brand market

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  • Wang, Bo
  • Zheng, Suli

Abstract

This paper studies the regulation of the brand market conceptualised as the merger & acquisition(M&A) market. By introducing a brand market into an endogenous growth model in which an informational asymmetry exists between capital-producing borrowers and lenders, we show a brand market screens the borrowers at the expense of crowding out real investment. The optimal brand price trades off the screening effect and the crowding out effect. The social planner could levy a reimbursement tax to achieve the optimal brand price. Capital income tax may be allowed to subsidise the brand purchase to activate the brand market.

Suggested Citation

  • Wang, Bo & Zheng, Suli, 2023. "Asymmetric information, credit market and the optimal regulation of brand market," Finance Research Letters, Elsevier, vol. 56(C).
    • Handle: RePEc:eee:finlet:v:56:y:2023:i:c:s1544612323004269
    DOI: 10.1016/j.frl.2023.104054
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    References listed on IDEAS

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    1. Bencivenga, Valerie R. & Smith, Bruce D., 1993. "Some consequences of credit rationing in an endogenous growth model," Journal of Economic Dynamics and Control, Elsevier, vol. 17(1-2), pages 97-122.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Asymmetric information; Brand market; Reimbursement tax;
    All these keywords.

    JEL classification:

    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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