Learning about Competitors: Evidence from SME Lending
Name
SSRN-id3286425.pdf
Description
Accepted version
Size
937.57 KB
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Unknown
Checksum (MD5)
404cd51ada790ebe3f1f7e8b590c81b4
Author(s)
Darmouni, Olivier
Sutherland, Andrew Gordon
Date Issued
September 2020
Journal
Review of Financial Studies
Publisher
Oxford University Press (OUP)
Citation
Darmouni, Olivier and Andrew Sutherland. “Learning about Competitors: Evidence from SME Lending.” Review of Financial Studies (September 2020): 2275–2317. © 2020 The Author(s)
Version
Author's final manuscript
Abstract
We study how small and medium enterprise (SME) lenders react to information about their competitors’ contracting decisions. To isolate this learning from lenders’ common reactions to unobserved shocks to fundamentals, we exploit the staggered entry of lenders into an information-sharing platform. Upon entering, lenders adjust their contract terms toward what others offer. This reaction is mediated by the distribution of market shares: lenders with higher shares or that operate in concentrated markets react less. Thus, contract terms are shaped not only by borrower or lender fundamentals but also by the interaction between information availability and competition.
MIT Department
Sloan School of Management
Terms of Use
Creative Commons Attribution-Noncommercial-Share Alike
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DOI of Published Version
https://doi.org/10.1093/RFS/HHAA109
