Martin, Alberto; Taddei, Filippo - Barcelona Graduate School of Economics (Barcelona GSE) - 2012
The financial crisis of 2007-08 has underscored the importance of adverse selection in financial markets. This friction … selection. Our main results are that, by fostering unproductive investment, adverse selection: (i) leads to an increase in the … frictions complement one another and argue that limited pledgeability exacerbates the effects of adverse selection. …