THE BANK LOANS IMPORTANCE, INFORMATION ASYMMETRY AND THE IMPACT OF FINANCIAL AND ECONOMIC CRISIS ON CORPORATE FINANCING
THE BANK LOANS IMPORTANCE, INFORMATION ASYMMETRY AND THE IMPACT OF FINANCIAL AND ECONOMIC CRISIS ON CORPORATE FINANCING

Summary/Abstract: Bank loans have an increasing role for corporate activities. In most countries, bank loans are the main source of financing for small and medium-sized enterprises. Even though the role of banks decreased in the last years, banks take advantage of a privileged position which allows them to provide liquidity cheaply than other intermediaries. The activity of bank lending is often influenced by the adverse selection due to the fact that corporate clients are often reluctant, in providing the complete and real information about them. As a result the information asymmetry may have a negative impact both on banks and companies. The most important effects of the financial and economic crisis on the companies are the drastic drop in demand for goods and services and a tightening in credit terms, which are severely affecting their cash flows. Also, companies face financing constraints which often amplify the effects of crisis.

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