Informal Financial Networks: Theory and Evidence / Mark J. Garmaise, Tobias J. Moskowitz.

Format:

Book

Author/Creator:

Garmaise, Mark J.

Contributor:

National Bureau of Economic Research.

Moskowitz, Tobias J.

Series:

Working Paper Series (National Bureau of Economic Research) no. w8874.

NBER working paper series no. w8874

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Informal Financial Networks

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2002.

Summary:

We develop a model of informal financial networks and present corroborating evidence by studying the role of professional property brokers in the U.S. commercial real estate market. Our model demonstrates how service intermediaries, who do not supply finance themselves, can facilitate their clients' access to finance via repeated informal relationships with lenders. Empirically, we find that, controlling for endogenous broker selection, hiring a broker strikingly increases the probability of obtaining a bank loan from 40 to 58 percent. Our results demonstrate that even in the U.S., with its well-developed capital markets, informal networks play an important role in controlling access to finance.

Notes:

Print version record

April 2002.