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Credit Relationships: Evidence from Experiments with Real Bankers
Author(s) -
CORNÉE SIMON,
MASCLET DAVID,
THENET GERVAIS
Publication year - 2012
Publication title -
journal of money, credit and banking
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.763
H-Index - 108
eISSN - 1538-4616
pISSN - 0022-2879
DOI - 10.1111/j.1538-4616.2012.00517.x
Subject(s) - moral hazard , loan , originality , business , term (time) , actuarial science , subject (documents) , finance , economics , monetary economics , microeconomics , incentive , political science , law , physics , quantum mechanics , creativity , library science , computer science
We experimentally examine to what extent long‐term “lender–borrower” relationships mitigate moral hazard. The originality of our research lies in recruiting not only students but also commercial and social bankers. The opportunity to engage in bilateral long‐term relationships mitigates the repayment problem. Lenders take advantage of their long‐term situation by increasing their rates. Consequently, borrowers are incited to take more risk. Improving information disclosure ameliorates the repayment but does not incite lenders to offer more credits. Social bankers exhibit a higher probability of granting a loan and make fairer credit offers to borrowers than the other subject pools do.