Finance Research Seminar

Ort: Wirtschaftsuniversität Wien D3.0.225 am 17. November 2017 Startet um 11:00 Endet um 12:30

Veranstalter Wirtschaftsuniversität Wien Vienna Graduate School of Finance

Finance Research Seminar organized by VGSF

Finance Research Seminar Series 2017/2018

We explain the endogenous emergence of a variety of lending intermediaries in a model based only on differences in their funding costs. Banks have a lower cost of capital than non-banks due to government safety nets. However, with only bank finance, entrepreneurs make inefficient project choices, forgoing innovative projects for traditional projects. Non-banks emerge to mitigate this inefficiency, using their high cost of capital as a commitment device not to fund traditional projects, thus inducing entrepreneurs to innovate efficiently. Despite earning high returns, non-banks never take over the entire market, but coexist with banks in general equilibrium.



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