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Trust in Lending / Richard T. Thakor, Robert C. Merton.
- Format:
- Book
- Author/Creator:
- Thakor, Richard T.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w24778.
- NBER working paper series no. w24778
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2018.
- Summary:
- We develop a theory of trust in lending, distinguishing between trust and reputation, and use it to analyze the competitive interactions between banks and non-bank lenders (fintech firms). Trust enables lenders to have assured access to financing, whereas a loss of investor trust makes this access conditional on market conditions and lender reputation. Banks endogenously have stronger incentives to maintain trust. When borrower defaults erode trust in lenders, banks are able to survive the erosion of trust when fintech lenders do not. Trust is also asymmetric in nature--it is more difficult to gain it than to lose it.
- Notes:
- Print version record
- June 2018.
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