Date of Award
Applied Economics, M.A.
Economics and Finance Department
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This paper will demonstrate the impact information asymmetry has on risk management. There is a noticeable impact within the context of consumer credit risk. If a firm is able to recognize this, they can make improved credit decisions that will reduce the consequences. The theoretical impact will be presented while depicting areas of risk management that are susceptible to information asymmetry. We find a direct impact on the development of scoring models, credit policies, and origination volume. These results hold for banks with portfolios consisting of consumer credit products and small business loans. Once known, banks can better tailor their credit policies and underwriting guidelines to reduce the impact. This will provide the blueprints for empirical research into the fiscal consequences, particularly concerning loss provisioning and the charge-off of consumer loans.
Merrill, Howard J. III, "Consequences of Information Asymmetry on Corporate Risk Management" (2017). Applied Economics Theses. 21.