This paper analyzes the impact of an information technology revolution on credit markets. We focus on two aspects of technological progress. On the one hand, better information technology may result in improved information processing; on the other, it might also lead to low cost or even free...

Debt financing plays an important role in the funding of innovative firms, and patents have been increasingly used as collateral. We examine financing of innovative firms when future innovations are not verifiable and hence patenting, which creates a verifiable asset, cannot be contracted upon....

In many countries, the legal system or social norms ensure that firms are stakeholder oriented. We analyze the advantages and disadvantages of stakeholder-oriented firms that are concerned with employees and suppliers compared to shareholder-oriented firms in a model of imperfect competition....

This paper analyzes the impact of two dimensions of technological progress on competition in financial services. On the one hand, better information technology may result in improved information processing; on the other, it might also lead to low cost or even free access to information through,...

Regulatory changes and technological advances have profoundly affected the competitive landscape of credit markets. In this paper, we investigate how intermediaries alter their information acquisition strategies in response to increased competition. We specify a model where the severity of...

Proprietary information generated through the process of lending can impact the structure of the banking industry. With more competing banks, borrower-specific information becomes more disperse, as each bank becomes informed about a smaller pool of borrowers. This reduces banks' screening...

The superior nature of the information exchanged over the course of a lending relationship generates a bank-client specificity to the extent that such information cannot be communicated credibly to outsiders. Consequently, banks obtain higher profits from more captured borrowers than from...

While competition constrains the ability of banks to extract informational rents from lending relationships, their informational monopoly curtails competition through the threat of adverse selection. These opposing forces also shape banks' incentives to invest in relationship lending expertise....

We analyze the nature of financial contracting when an entrepreneur can choose the specificity of investments and financial contracts are incomplete. Investing in project specific assets increases productivity but decreases liquidation value. This creates a strategic incentive to specialize...

When do sellers benefit from the presence of a strong buyer? In a second-price auction with independent private values and entry costs for buyers, we allow for one buyer to be stochastically "strong." We show that when buyers make positive net profits, seller revenue is higher with a stronger...