DoVentureCapitalistsAffectInvestmentPerformance（二）.pptVIP

* * * * * * * * * Competition and Specialization in Credit Markets Rebecca Zarutskie Duke University 45th Annual Bank Structure Conference Federal Reserve Bank of Chicago May 6, 2009 * Motivation Large theoretical, empirical and policy debate about the role of credit market competition on lending. Conflicting evidence on the role of competition on lending – though some consensus, there are still outstanding questions. Whether and how banks specialize in reaction to competition is an important component to the debate. * Theoretical framework How may banks specialize, or become better relative to their competitors, in lending? Two ways Loan cost reduction E.g., lower costs of processing loan applications, reduce cost of capital used to make loans by tapping new investor base Better borrower quality assessment E.g., banks are able to distinguish individual borrower repayment probabilities relative to the group average Both types of specialization allow banks to increase their profit margins in these loan markets as well as increase their share of loans in these markets by enabling them to undercut the market interest rates on loans in these markets. * Empirical predictions If a bank specializes more in a particular lending market relative to the other lending markets it serves, we should expect that the bank’s loan portfolio will have a greater share of loans from the market in which it specializes. If a bank specializes in a lending market by lowering the cost of making loans in that market, we should expect that the average repayment rate on these loans in the bank’s portfolio will be lower, or that the average default rate will be higher. If a bank specializes by becoming better able to assess borrower quality, we should expect that the average repayment rate on these loans in the bank’s portfolio will be higher, or that the average default rate will be lower. * Empirical predictions (II) Larger banks may be able to lower loan costs relative to s