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Asymmetric group loan contracts: experimental evidence

Francesco Carli et al.

Journal of Economic Science Association2025https://doi.org/10.1017/esa.2025.10024article
AJG 1ABDC A
Weight
0.50

Abstract

We design an experiment to study the effect of asymmetry in the context of group lending with joint liability. The performance of group loan contracts crucially hinges on borrowers engaging in peer monitoring and the common practice is to offer participants of a group loan symmetric contract terms. Our experiment shows that asymmetric contracts, in which monitoring is a dominant strategy for one borrower, increase the monitoring rate, and thus the repayment rate, without leaving borrowers substantially worse off. In addition, asymmetric contracting also raises expected profits of the lending institution. Overall, our experiment reveals that asymmetric group loan contracts are worth considering as part of a policy to maintain both financial stability and higher lender profits.

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https://doi.org/https://doi.org/10.1017/esa.2025.10024

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@article{francesco2025,
  title        = {{Asymmetric group loan contracts: experimental evidence}},
  author       = {Francesco Carli et al.},
  journal      = {Journal of Economic Science Association},
  year         = {2025},
  doi          = {https://doi.org/https://doi.org/10.1017/esa.2025.10024},
}

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Asymmetric group loan contracts: experimental evidence

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Evidence weight

0.50

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.50 × 0.4 = 0.20
M · momentum0.50 × 0.15 = 0.07
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

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