FRIC/Finance Seminar with Olivier Darmouni, Columbia Business School
FRIC Center for Financial Frictions and the Department of Finance are proud to announce the upcoming seminar with Olivier Darmouni, Columbia Business School.
Olivier Darmouni will present
Estimating Informational Frictions in Sticky Relationships
This paper introduces a novel empirical approach to estimate the effects of an informational friction limiting the reallocation of credit after a shock to banks. Because lenders rely on private information when deciding which relationship to end, borrowers looking for a new lender are adversely selected. I show how to identify private information separately from information common to all lenders, but unobservable to the econometrician, by using bank shocks within a discrete-choice model of relationships. Applying this approach to the U.S. corporate loan market during the recent crisis, this informational friction can explain 10% of the decrease in lending.
Solbjerg Plads 3, 2000 Frederiksberg