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Contribution Details

Type Journal Article
Scope Discipline-based scholarship
Title Information asymmetry and foreign currency borrowing by small firms
Organization Unit
  • Martin Brown
  • Steven Ongena
  • Pinar Yeşin
Item Subtype Original Work
Refereed Yes
Status Published in final form
  • English
Journal Title Comparative Economic Studies
Publisher Palgrave Macmillan
Geographical Reach international
ISSN 0888-7233
Volume 56
Page Range 110 - 131
Date 2014
Abstract Text We model how an information asymmetry between the lending bank and the applying firm about the currency structure of firm revenues may affect loan currency choice. Our framework features a trade-off between the lower cost of foreign currency debt and the costs of currency induced loan default. We show that under imperfect information about firm revenues more local earners choose foreign currency loans, as they do not bear the full cost of the corresponding credit risk. This result is consistent with recent evidence showing that information asymmetries may increase foreign currency borrowing by retail clients in the transition economies.
Related URLs
Digital Object Identifier 10.1057/ces.2013.9
Other Identification Number merlin-id:8440
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