Working Paper: NBER ID: w8874
Authors: Mark J. Garmaise; Tobias J. Moskowitz
Abstract: 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.
Keywords: No keywords provided
JEL Codes: G2; G3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Hiring a professional property broker (L85) | Increased likelihood of obtaining a bank loan (G21) |
| Hiring a professional property broker (L85) | Probability of obtaining a bank loan (G21) |