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Banking Concentration, Information Asymmetries and Credit Rationing or the Argentinean Case

Arroyo, Martín R. (2007): Banking Concentration, Information Asymmetries and Credit Rationing or the Argentinean Case.

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Abstract

The general idea of this work is to analyse how a banking concentration process can generate information asymmetries causing credit rationing in specific sectors of the economy. To perform this analysis will be used a real and not a theoretical framework as it was the bank concentration process that took place in Argentina in the second half of the 1990s and the specific sector of the economy covered are the SMEs. The work begins with a theoretical introduction and then a description of the process of banking concentration mentioned. In a second part analyses how bank concentration process generates fewer and larger financial institutions and the relationship between the size of these financial institutions and the type of information they handle from their customers, trying to show that the higher the institution the worst is the quality of information obtained on the SME sector or even the lack of information at all, in this second part is also shown the effect of credit rationing caused by this information asymmetry. In the final part of the paper attempts to show the effect of credit rationing in an SME, here is a brief analysis based on a case study that aims to highlight the importance that the financial cost has upon working capital for an SME survival.

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