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A Smoke Screen Theory of Financial Intermediation

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  • Régis Breton

    (LEO - Laboratoire d'économie d'Orleans [2008-2011] - UO - Université d'Orléans - CNRS - Centre National de la Recherche Scientifique)

Abstract

This paper analyzes a stylized (two period) credit market where investors care about the appropriability of the information they produce when they engage in costly ex ante evaluation of borrowers quality. We show that diversified intermediation arises as a dissimulation mechanism allowing investors to extract informational rents in the second period, thereby mitigating the underlying appropriability problem.
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Suggested Citation

  • Régis Breton, 2006. "A Smoke Screen Theory of Financial Intermediation," Post-Print halshs-00256839, HAL.
    • Handle: RePEc:hal:journl:halshs-00256839
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    Cited by:

    1. Tri Vi Dang & Gary Gorton & Bengt Holmström & Guillermo Ordoñez, 2017. "Banks as Secret Keepers," American Economic Review, American Economic Association, vol. 107(4), pages 1005-1029, April.
    2. Jungherr, Joachim, 2016. "Bank opacity and financial crises," Economics Working Papers ADE2016/02, European University Institute.
    3. Jungherr, Joachim, 2018. "Bank opacity and financial crises," Journal of Banking & Finance, Elsevier, vol. 97(C), pages 157-176.

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    More about this item

    Keywords

    Smoke; Screen; Theory; Financial; Intermediation;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G00 - Financial Economics - - General - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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