2022 WFA Meeting in Portland, Oregon-presentations by Clément Mazet-Sonilhac, Barbara Rindi

Information Frictions in Credit Markets

Clément Mazet-Sonilhac

Accepted for presentation at 2022 WFA Meeting in Portland, Oregon

Abstract

Motivated by empirical evidence I document on local credit markets in France using data on more than 3.5 million bank-firm relationships, I propose a theory of bank-firm matching, subject to search frictions. Firms undergo a costly search process to locate and match with the right banking partner. Upon matching, agency frictions hinder bank's ability to optimally screen and monitor projects. I estimate structurally my model on French data using the staggered roll-out of Broadband Internet, from 1997 to 2007, as a shock to search frictions. I confirm the model predictions that a reduction in search frictions affects the allocation of credit and the dynamics of firm-bank matching. Finally, I use the structure of my model to quantify the impact of this technology-induced reduction in search frictions on loan prices. I find that broadband internet access reduced the cost of debt for small businesses by 4.9%

Trading Fees and Intermarket Competition

Barbara Rindi, Marios Panayides, and Ingrid Werner

Accepted for presentation at 2022 WFA Meeting in Portland, Oregon

Abstract

We model an order book with liquidity rebates (make fees) and trading fees (take fees) that faces intermarket competition, and use the models insights to explain changes in market quality and market shares following changes in make-take fees. As predicted by our model, we document that fee changes by one venue affect market quality and market shares for all venues that compete for order flow. Furthermore, we document cross-sectional differences in changes in market quality and market shares following a simultaneous decrease in both make and take fees consistent with traders in large (small) capitalization stocks being more sensitive to the change in make (take) fees.