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This paper investigates the importance and the determinants of trust in a lending situation using a controlled experiment. We find that communication can facilitate collaboration between lenders and borrowers through three channels of trust: (1) an information channel, (2) a preference channel, and (3) a reciprocity channel. Our results highlight the role of trust in mitigating the moral hazard problem in lending. [ABSTRACT FROM AUTHOR]

Recent research has identified a key subset of the business population that comprises firms who had sought external finance but subsequently withdrew from the credit market completely despite still requiring finance. Utilising the UK's Longitudinal Small Business Survey between 2015 and 2020, we identify the consequences in terms of lost jobs and sales of these small- and medium-sized enterprises (SMEs) dropping out of the credit market for finance. We conduct our analysis at the regional and sub-regional level and found that around 230,000 SMEs have dropped out of the UK credit market and that in many localities this has reduced job creation and sales income growth. We conclude that this exclusionary borrowing behaviour will add further to existing regional and sub-regional economic inequalities in the UK, making the 'levelling up' agenda a very elusive policy objective. [ABSTRACT FROM AUTHOR]

We investigate the impact of the financial cycle on fiscal policy by estimating fiscal multipliers for different types of government spending that are contingent on two states determined by the financial cycle. To obtain our estimates, we extend the threshold VAR method from a single country to a panel of high-income countries. Our results indicate that the multiplier for government investment is affected by the state of the financial cycle: while the initial impact is positive for both states, in an upturn it turns negative, while in a downturn it remains positive. In the case of government consumption, the multiplier does not seem to significantly depend on the financial cycle. However, jointly conditioning on the financial and business cycles produces multipliers of government consumption which vary over the states of both cycles. This contrasts with the results for government investment which are left essentially unchanged by the joint conditioning on the four states defined by both cycles. [ABSTRACT FROM AUTHOR]

We use a two‐stage experiment on agricultural lending in Mali to test whether selection into lending is predictive of heterogeneous returns to capital. Understanding this heterogeneity, and the selection process which reveals it, is critical for guiding modeling of credit markets in developing countries, as well as for policy. We find such heterogeneity: returns to capital are higher for farmers who borrow than for those who do not. In our first stage, we offer loans in some villages and not others. In the second stage, we provide cash grants to a random subset of all farmers in villages where no loans were offered, and to a random subset of the farmers who do not borrow in villages where loans were offered. We estimate seasonal returns to the grant of 130% for would‐be borrowers, whereas we find returns near zero for the sample representative of non‐borrowers. We also provide evidence that there are some farmers—particularly those that are poor at baseline—that have high returns but do not receive a loan. [ABSTRACT FROM AUTHOR]

Different forms of social learning have been explored to act as complements to conventional extension services. This paper examines the possibility of using vocational training to high school students who in turn transfer information to their parents. We conduct a randomized control trial in nine communities in rural Nicaragua and evaluate changes in the knowledge of agricultural technologies, access to credit markets, and technology adoption for parents and students using a difference-in-difference approach. Our results show improvements in knowledge-based outcomes for students and parents, and increased access to credit markets and adoption of agricultural technologies by parents. Given the increase in schooling across developing countries, our results suggest that programs designed around within-family information diffusion can complement more conventional forms of agricultural extension. Little explored channels of information exchange can act as complements or substitutes of conventional extension models, where those are weak or non-existent. This paper is one of the first to explore and evaluate the teacher-student-parent of information exchange as an alternative for agricultural technology diffusion. [ABSTRACT FROM AUTHOR]

This paper examines employee flows and the association with firm earnings and interest rates. We use administrative employer–employee matched panel data from Denmark spanning 17 years and hence exploit actual data on employee arrivals (labor inflows) and departures (labor outflows). Three main findings emerge. First, we condition by firms' economic conditions. Departures predict earnings increases for prior‐year loss firms, while they predict earnings decreases for prior‐year profit firms, suggesting that this conditioning can help explain the mixed results in the literature. Arrivals predict earnings increases, though only for prior‐year profit firms. These effects are stronger for high‐paid employees than for low‐paid ones. Second, the effects of departures are generally larger than the effects of arrivals, consistent with departures disrupting operations. Third, we find that lenders price employee flow information but only for departures of high‐paid employees, despite the predictive ability of the flow of other employees for future earnings. Overall our results suggest that employee flows predict firm financial performance but are only partially priced by lenders. [ABSTRACT FROM AUTHOR]

Using a unique dataset of more than 2 million Chinese firms that received credit from both an important big tech firm (Ant Group) and traditional commercial banks, this paper investigates how different forms of credit correlate with local economic activity, house prices, and firm characteristics. We find that big tech credit does not correlate with local business conditions and house prices when controlling for demand factors, but reacts strongly to changes in firm characteristics, such as transaction volumes and network scores used to calculate firm credit ratings. By contrast, both secured and unsecured bank credit react significantly to local house prices, which incorporate useful information on the environment in which clients operate and on their creditworthiness. This evidence implies that the wider use of big tech credit could reduce the importance of the collateral channel but, at the same time, make lending more reactive to changes in firms' business activity. [ABSTRACT FROM AUTHOR]

Copyright of Hispania: Revista Española de Historia is the property of Consejo Superior de Investigaciones Cientificas and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

This paper contributes to the political economy literature exploring the intersection of the welfare state and financialisation by addressing two important questions that have emerged from recent findings. First, why have both low generosity and high generosity environments been linked to higher levels of household debt? Second, how might this be explained by the variation in the role of debt across these very different contexts? To answer these questions, I develop a typology of Welfare State – Credit Contexts, which emerges from the interaction of two dimensions: welfare generosity and credit access. I test the implications of this model using welfare generosity and household liabilities data for a sample of OECD countries, spanning from the late 1990s to 2010. Using fixed effects models, I find that welfare generosity is negatively related to non-mortgage debt, with evidence that this relationship is conditional on credit access. In contrast, I find mortgage debt is consistently linked to levels of credit accessibility but fail to establish its relationship to welfare generosity. These results demonstrate the need for greater specificity when discussing the relationship between welfare generosity and household debt and for greater attention to the causes and consequences of different types of household debt. [ABSTRACT FROM AUTHOR]

This paper demonstrates that endogenous fluctuations are possible in the market for loans. In the context of a three-period overlapping generations economy, the deposit rates offered to lenders are found to exhibit complex dynamics when financial intermediaries mediate borrowing and lending. Constant relative risk aversion of savers is found to generate a first-order nonlinear equation in the deposit rates. Concavity and convexity assumptions of production and savings functions are found to generate a type of dynamic relationship between the loan rates that is well known in the literature for generating complex dynamics. While the main analysis is conducted with general functions, an example is provided to support the theory presented. [ABSTRACT FROM AUTHOR]

• This study examines the peer effect in microloan transactions using data from a leading Chinese Peer-to-Peer lending platform. • The finding is supported by both econometric models and explainable machine learning: the likelihood of a borrower's funding success is higher when a greater proportion of their online friends succeed. • Both borrowers' network centrality and digital footprints strengthen this peer effect, suggesting two mechanisms: social learning and informational complementarity. • The peer effect is stronger among borrowers with larger networks, more loan experience, better repayment, and older age. • The research provides new insights into how friendship networks can mitigate information asymmetry in financial markets and guide investment decisions. The challenge of limited information in online credit markets is well-recognized. This study examines the peer effect in microloan transactions using data from a leading Chinese lending platform. Results show that the likelihood of a borrower's funding success is higher when a higher proportion of online friends succeed. Both borrowers' network centrality and digital footprints strengthen this effect, suggesting two mechanisms: social learning and informational complementarity. The peer effect is stronger among borrowers with larger networks, more loan experience, better repayment, and older age. The research provides new insights to mitigate information asymmetry in financial markets and guide investment decisions. [ABSTRACT FROM AUTHOR]

What is the relationship between debt and the welfare state? Recent arguments suggest that credit markets fill gaps left by limited social benefits but often rest on thin empirical grounds. This article makes two contributions to this debate by using micro-level panel data and leveraging variation in welfare state generosity across US states and over time. First, it shows that households that experience unemployment borrow significantly more in states where unemployment benefits are low compared to states where benefits are high. A 10-percentage-point decrease in unemployment replacement rates increases debt levels by about 30 per cent, or $5,300. Secondly, the article documents that rising indebtedness in the context of weak social policies has political consequences and increases support for a stronger safety net. One explanation is that voters seek social protection against downstream debt-induced economic risks. These findings suggest that welfare states can play a critical role in mitigating growing indebtedness. [ABSTRACT FROM AUTHOR]

We examine the impact of climate risk on discouraged borrowers among small and medium-sized enterprises (SMEs) in the eurozone, using a unique European Central Bank dataset focusing on the demand side of credit markets. We argue that two opposing channels may exist in this relationship: Either climate risk has a negative effect stemming from increased demand for sustainable or climate-resilient projects that enhance creditworthiness, or climate risk has a positive effect arising from heightened climate uncertainty and risk aversion, leading to credit self-rationing among SMEs. Our findings reveal that heightened climate risk prompts SMEs to self-ration credit, leading to higher probabilities of discouraged borrowers. Our research deepens the understanding of the impact of climate risk on credit-related decisions, stressing the need for proactive measures to integrate climate risk assessments into regulatory frameworks and lending practices. The findings underscore the vulnerability of SMEs to climate risk, emphasizing emphasizing the importance of tailored support mechanisms for economic resilience., (© 2024 The Author(s). Risk Analysis published by Wiley Periodicals LLC on behalf of Society for Risk Analysis.)

Agriculture is important for Sub-Saharan African development being a major source of poverty reduction, job and wealth creation. However, limited access to credit due to weak financial systems has over the years remained a major constraint for the sector. Extant studies show mixed and inconclusive results, suggesting that the effect of credit market on agriculture is influenced by other intervening variables. Accordingly, this paper examines the extent to which credit market conditions affect agricultural productivity. The study adopts a model that draws inspiration from a standard agriculture household framework that integrates both consumption and production decisions of farm households. In terms of methodology, the paper departs from existing literature because it gives due consideration to technological heterogeneity across countries. The model is estimated using pooled ordinary least square and fixed effect panel data estimator that accounts for omitted variable bias. The study uses yearly panel data for the period 1990-2015 for West Africa (13), Southern Africa (11), Central Africa (6) and East Africa (5); resulting in 35 Sub-Saharan African countries. The findings reveal that credit market conditions in terms of low lending rates and credit to the private sector are important for agricultural development within the sub-regions considered and this result is consistent after controlling for other important agricultural inputs. The empirical analysis further shows that limited credit access particularly in the East and Central African sub-regions compared to West and Southern Africa inhibits productivity. More so, availability of critical factor inputs such as agriculture equipment, fertilizer, infrastructure and precipitation exert a positive and significant impact on agriculture output. The results unexpectedly reveal that the effect of labor on agriculture output is negative and this outcome is traced to the low productivity of agriculture workers. The results are robust using an alternative estimator (fixed effect) and measure of the dependent variable (cereal yield). The results have important policy implications. First, lowering lending rate is a viable option for improving credit to the sector in addition to enhancing agriculture sector programs. Second, intensification of efforts particularly towards rural infrastructure development and indeed the provision of agriculture support systems that promote all-year farming may be considered. JEL Classifications: G21, G28, Q14 Keywords: Credit Market, Agriculture Productivity, Panel data analysis, Sub-Saharan Africa, INTRODUCTION Agriculture, an important sector in Sub-Saharan Africa (SSA), accounts for 65% employment and 75% domestic trade (Moyo et al., 2015); thus, driving growth and accounting for over 30% of [...]

After more than thirty-five years of the Gulf States' Al Manakh Crisis, the first tangible financial crisis on record for the region, this study revisits in time and investigates the causes and consequences. At a time when the Gulf States were emerging as growing economies from rising petro-dollar revenues, financial markets and institutions collapsed in 1982 due to unregulated credit markets and leveraged speculation in Gulf-based companies resulting in a USD 94 billion of outstanding debt in Kuwait, four times the country's GDP then. The study conducts an empirical investigation of the macroeconomic causes of the financial crisis by estimating a non-linear probit regression using data covering the period 1970-1996 and a qualitative analysis of regulatory evolution in financial markets during the same period and its impact on market development and investor sentiment. The results show that government expenditure is positive and statistically significant. Associating the probability of the crisis with the government expenditure reveals deficiencies in regulatory enforcement, absence of prudent policies and asymmetric long-term behaviours from various stakeholders that remain to date. Moreover, this study is able to draw a few key findings and suggestions necessary to the causes and lessons of the past financial crises. The results supports previous literature that liquidity, or lack of, can significantly impact financial stability. Furthermore, the lack of decisive regulatory action during the three year hype (1979-1982) caused further speculation in which the government had the chance to captivate before spurring out of control. The final set of findings rising from Al Manakh crisis is the unjustified behaviour of investors towards taking extreme measures for rapid accumulation of wealth. This calls for a comprehensive enforcement of code of ethics and conflicts of interest with regards to officials and legislators. The limitations of neoclassical finance on the prevailing moral hazard caused by the past crises and investor sentiment of government dependence on bailout calls for the theoretical frameworks and applications of behavioural finance to better comprehend the intuition of decision makers, regulators and investors. JEL Classifications: E13, E65, N15, N25 Keywords: Financial Crisis, Emerging Markets, Compliance, Financial History Contact author's email address: Al-abduljader.s@gust.edu.kw, INTRODUCTION This paper attempts to shed light on a major financial crisis in 1982 that nearly witnessed the break of Kuwait's banking system after all banks but one recorded significant [...]

• We examine the relationship between credit markets and financialization of real firms. • We find that financial strong regulation plays a mediating role in the mechanism of action. • Financial strong regulation strengthens this positive effect. Real entities in China have increasingly shown characteristics of financialization due to the economic crisis and overcapacity. However, there are few scholars to explore the intricacies of the credit market and its influence on corporate financialization, leading to ambiguity in the current comprehension. This paper conducts an empirical analysis to examine the influence of credit markets on corporate financialization based on A-share listed firms spanning 2008 to 2021, providing practical suggestions for businesses. [ABSTRACT FROM AUTHOR]

In this study, we examine the effects of mandatory IFRS adoption on accounting-based prediction models of CDS spreads for a sample of 292 firms in 16 countries. In our examination, we estimate the models for both financial and nonfinancial firms before and after mandatory IFRS adoption. We find that mean and median absolute percentage prediction errors are larger for both financial and non-financial firms after mandatory IFRS adoption. We also estimate accounting-based prediction models of CDS spreads separately for financial and non-financial US firms as a benchmark. Although US firms also show an increase in the mean and median absolute percentages of prediction errors over the same period, our findings from regressions that use a difference-in-difference design indicate that the increase is significantly greater for firms in countries that adopted IFRS mandatorily. We also find that in the post-adoption period, prediction errors are larger for firms in countries with weaker institutions such as low levels of property rights and more restrictive access to credit. [ABSTRACT FROM AUTHOR]

This study investigates intranational risk-sharing behaviour in Korea's 16 province-level regions over the period 2001–2017. Korea's degree of intranational risk-sharing is at an almost perfect level. However, the extent of risk-sharing declines in the period following the subprime crisis. We also find that risk-sharing through the factor markets works well for metropolitan cities while the degree of risk-sharing is much higher for provinces through the fiscal channel and the credit markets. [ABSTRACT FROM AUTHOR]

Non-profit organizations (NPOs), such as financial cooperatives, have a longstanding tradition in advanced market economies. We develop a model of 'mixed credit markets' where pure for-profit institutions (e.g. commercial banks) can coexist with financial NPOs which feature a concern for inter-member surplus redistribution (e.g. credit cooperatives) and enjoy privileged borrower-specific information vis-à-vis their for-profit peers, while facing higher funding costs. We formally investigate market competition between the two alternative financial organizations both offering contracts whose terms entail cross subsidization. We argue that heterogeneity in organizational models can explain stable coexistence under competitive conditions, and also help us interpret the variety of market outcomes — in terms of e.g. overall coverage and market shares — as documented in modern financial systems. Importantly, the viability of redistribution-oriented NPOs is shown not to rest on under-investment issues or concerns about market power, for they can successfully operate in markets where credit rationing never arises. [ABSTRACT FROM AUTHOR]

We examine whether the adoption of internationally recognized accounting standards is associated with a greater sensitivity of credit ratings to accounting information. We find that credit ratings are significantly more sensitive to the accounting default factor post voluntary International Financial Reporting Standards (IFRS)/U.S. Generally Accepted Accounting Principle (GAAP) adoption. Similar evidence is also found post mandatory IFRS adoption in countries with strong rules of law. Collectively, the above evidence suggests that firms’ incentives to comply are important in determining the consequences of accounting standard changes. [ABSTRACT FROM PUBLISHER]

Firms face a trade-off between patenting, thereby disclosing innovation, and secrecy. We show that this trade-off interacts with firms' financing choices. As a shock to innovation disclosure, we study the American Inventor's Protection Act that made firms' patent applications public 18 months after filing, rather than when granted. We find that such increased innovation disclosure helps firms switch lenders, resulting in lower cost of debt, and facilitates their access to syndicated-loan and public capital markets. Our evidence lends support to the idea that public-information provision through patents and private information in financial relationships are substitutes, and that innovation disclosure makes credit markets more contestable. This paper was accepted by Gustavo Manso, finance. [ABSTRACT FROM AUTHOR]

This study investigates the relationship between remittances and credit markets in Senegal, focusing on rural areas where financial constraints are more challenging. Using a household fixed effects model, the findings show that remittances and credit markets are complements; namely, the receipt of remittances is positively associated with the likelihood of having a loan in a household. This means that migrants can increase the reliability of their family members and close relatives back home through their remittances, insuring them vis‐à‐vis lenders for their credit contracts. They are the collateral or the "element of trust" in the credit contract between the borrower and the lender, representing a potential alternative in case of non‐repayment. This result is robust to alternative models and various robustness tests mitigating the potential endogeneity of remittances. A detailed analysis also shows that the relationship between remittances and credit markets is mainly driven by loans taken for consumption and food, in particular, as well as loans provided by informal institutions. [ABSTRACT FROM AUTHOR]

Banks' limited knowledge about borrowers' creditworthiness constitutes an important friction in credit markets. Is this friction deeper in recessions, thereby contributing to cyclical swings in credit, or is the friction reduced, as bad times reveal information about firm quality? We test these alternative hypotheses using internal ratings data from a large Swedish cross‐border bank and credit scores from a credit bureau. The ability to classify corporate borrowers by credit quality is greater during bad times and worse during good times. Soft and hard information measures both display countercyclical patterns. Our results suggest that information frictions in corporate credit markets are intrinsically countercyclical and not due to cyclical variation in monitoring effort. The presence of countercyclical information frictions provides a rationale for countercyclical provisions or capital in banks to smooth credit cycles. [ABSTRACT FROM AUTHOR]

Copyright of Historisk Tidskrift is the property of Svenska Historiska Foereningen and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Copyright of Estudios Regionales en Economía, Población y Desarrollo is the property of Estudios Regionales en Economia, Poblacion y Desarrollo and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

This article uses a simple economic model to study important issues in debates about distributive justice. What role do non-labor productive assets play? What role does private ownership play? What role does scarcity play? What role do credit and labor markets play? The model is used to address these questions, and in the process explain why even if those who acquire scarce productive assets do so fairly, and in a manner that deserves compensation, there is reason to believe (1) that when people own productive assets privately outcomes will become unfair, and (2) credit and labor markets will aggravate inequities. The article concludes that distributive justice requires compensation commensurate with the economic sacrifices people make and acknowledges important challenges that must be overcome to achieve this. [ABSTRACT FROM AUTHOR]

We identify the network structure of spillovers and time-varying spillover intensities across European sovereign credit markets proposing a novel Copula-Granger causality based structural vector auto-regressive (SVAR) approach. Via the proposed framework, we examine the topological and time-varying spillover and contagion between 13 European credit markets, which is found to be consistent with crisis events. The heterogeneity in directional impacts could be useful in revealing contagion effects across the credit markets. We also find that newly proposed surprise and uncertainty indexes, among other macro-economic variables, significantly explain the spillover dynamics. [ABSTRACT FROM AUTHOR]

World banking systems are almost invariably populated by relatively diverse financial institutions. This paper studies the operation of credit markets where heterogeneous banks compete for investment projects of varying quality in the presence of informational asymmetries. We emphasize on two dimensions of heterogeneity – access to project-specific information vis-à-vis funding costs – which naturally reflect lenders' comparative disadvantages in the competitive landscape. Two main findings stand out. First, competition across heterogeneous banks can produce multiple equilibria. Thus, economies with similar fundamentals may well display a variety of interest rates and/or market shares for the operating institutions. Second, market failures (overlending) always prove mitigated in heterogeneous banking systems, relative to a world with equally uninformed lenders. This discipline effect however comes with a chance for market fragility, whereby modest changes in the business environment or other fundamentals can trigger large shifts in the price of credit, leading to either highly selective markets or rather ones which overfund ventures of the lowest quality. Extensions of the basic model and some policy implications are also discussed. [ABSTRACT FROM AUTHOR]

The regulation of short-term consumer credit markets is heatedly debated around the world. This article uses economic research as a basis for a qualitative assessment of the regulation of the short-term consumer credit market and discusses the experience of the recent regulations implemented in Finland. According to research, the interest rate ceiling is an inefficient way of regulating the short-term consumer credit market. In contrast, the regulations should be based on price transparency and results from behavioral economics. [ABSTRACT FROM AUTHOR]

By shrinking the available menu of loan contracts, asymmetric information can result in two types of nonprice rationing in credit markets. The first is conventional quantity rationing. The second is 'risk rationing.' Risk rationed agents are able to borrow, but only under relatively high collateral contracts that offer them lower expected well-being than a safe, reservation rental activity. Like quantity rationed agents, credit markets do not perform well for the risk rationed. While the incidence of conventional quantity rationing is straightforward (low wealth agents who cannot meet minimum endogenous collateral requirements are quantity rationed), the incidence of risk rationing is less straightforward. Increases in financial wealth, holding productive wealth constant, counter intuitively result in the poor becoming entrepreneurs and the wealthy becoming workers. While this counterintuitive puzzle has been found in the literature on wealth effects in principal-agent models, we show that a more intuitive pattern of risk rationing results if we consider increases in productive wealth. Empirical evidence drawn from four country studies corroborates the implications of the analysis, showing that agents with low levels of productive wealth are risk rationed, and that their input and output levels mimic those of low productivity quantity rationed firms.