Flight to Quality or to Captivity ? Information and Credit Allocation ∗

@inproceedings{Dell2000FlightTQ,
  title={Flight to Quality or to Captivity ? Information and Credit Allocation ∗},
  author={Giovanni Dell and Robert Marquez},
  year={2000}
}
This paper analyzes how banks reallocate liquidity across borrowers when exogenous shocks force them to curtail credit. It shows that in addition to a “ßight to quality” effect there may be a “ßight to captivity effect”. The superior nature of the information exchanged over the course of a lending relationship generates a bank-client speciÞcity to the extent that such information cannot be communicated credibly to outsiders. Consequently, banks obtain higher proÞts from more captured borrowers… CONTINUE READING