Earticle

초록

영어

This paper extends a screening model in financial intermediation and provides a model for the choice of financing sources between bank loans and finance loans. This paper incorporates the positive marginal rents or mark-up of a seller in a monopolistically competitive products (capital goods) market into the equilibrium loan contracts in a perfectly competitive loan market and examines borrower’s choice of different financing sources. When the sale of differentiated products is tied to financing and the additional sale of product extracts positive marginal rents, a captive finance company offers a pooling loan contract with higher loan rate and approval rate. A pooling finance loan contract needs to be subsidized by the additional sale of products to be sustainable. Banks offer separating low- and high-risk loan contracts. A low-risk borrower is indifferent between a separating bank low-risk loan contract and a pooling finance loan contract while a high-risk borrower strictly prefers a pooling finance loan contract to a separating bank high-risk loan contract. Hence, the model successfully explains the prevailing wisdom in lending practices and previous empirical findings that on average finance companies service a riskier pool of borrowers, offering more lenient loan approval rates and higher loan rates, than banks do. In addition, this paper shows the interaction between the product and debt markets in that the effective number of buyers in the monopolistically competitive products market is determined by the number of borrowers approved for loans in the debt market.

목차

Abstract
 1. Introduction
 2. Equilibrium Only with Banks
 3. Equilibrium with Banks and Captive Finance Companies
 4. Concluding Remarks
 REFERENCES

키워드

저자

• Byung-Uk Chong [ Assistant Professor of Finance College of Business Administration Ewha Womans University ]

참고문헌

발행기관

간행물

표지보기 관심저널 등록

• 간행물명

  한국재무학회 학술대회

• 간기

  부정기

• 수록기간

  2006~2024

• 십진분류

  KDC 325 DDC 330