Mediating Financial Intermediation

Bellon, Aymeric and Harpedanne de Belleville, Louis-Marie and Pinardon-Touati, Noémie (2021): Mediating Financial Intermediation.

Abstract

This paper studies the resolution of disputes between firms and their lenders through external mediators, who suggest a non-legally binding solution to resolve a disagreement after communicating with all parties. We exploit an administrative database on firms’ outcomes matched to the French credit registry and plausible exogenous variation in eligibility to public mediators across counties for identification. Credit, employment and investment increase following the mediation, causing an overall reduction in firms’ liquidation of 34.6 percentage points. All the effects are driven by firms that borrow from more than one financial institution, supporting the view that mediators solve coordination problems between lenders.

• Item Type: MPRA Paper
• Language: English
• Keywords: Mediation, credit, asymmetric information, coordination of creditors, informal restructuring, financial constraints, debt overhang, bankruptcy, employment, investment, judge instrument, borders
• Subjects: D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D82 - Asymmetric and Private Information ; Mechanism Design; G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages; G - Financial Economics > G2 - Financial Institutions and Services > G28 - Government Policy and Regulation; H - Public Economics > H8 - Miscellaneous Issues > H81 - Governmental Loans ; Loan Guarantees ; Credits ; Grants ; Bailouts; H - Public Economics > H8 - Miscellaneous Issues > H89 - Other

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