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Efficent credit rationing

de Meza, David ORCID: 0000-0002-5638-8310 and Webb, David C. (1992) Efficent credit rationing. European Economic Review, 36 (6). pp. 1277-1290. ISSN 0014-2921

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Identification Number: 10.1016/0014-2921(92)90032-R


This paper shows that credit rationing is endemic to competitive capital markets in which information is symmetrically distributed. Equilibrium contracts may restrict loans to a size well below that at which backruptcy is a threat. The model predicts that credit rationing will be most severe on projects of intermediate risk and decreases the more costly it is for creditors to recover bad debts. However, there is no case for government intervention, despite the usual identification of credit rationing as a per se capital market imperfection.

Item Type: Article
Official URL:
Additional Information: © 1992 Elsevier Science Publishing B.V.
Divisions: Finance
Financial Markets Group
Subjects: H Social Sciences > HG Finance
Date Deposited: 06 May 2011 11:29
Last Modified: 15 May 2024 23:33

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