publication . Article . 2011

Group lending and the role of the group leader

Eijkel, van, R.; Hermes, N.; Lensink, B.W.;
Open Access English
  • Published: 01 Apr 2011 Journal: Small Business Economics, volume 36, issue 3, pages 299-321 (issn: 0921-898X, Copyright policy)
  • Publisher: Springer Nature
Abstract
This paper investigates strategic monitoring behavior within group lending. We show that monitoring efforts of group members differ in equilibrium due to the asymmetry between members in terms of future profits. In particular, we show that the entrepreneur with the highest future profits also puts in the highest monitoring effort. Moreover, monitoring efforts differ between group members due to free-riding: one member reduces her level of monitoring if the other increases her monitoring effort. This effect is also at play when we introduce a group leader into the model. The individual who becomes the group leader supplies more monitoring effort than in the bench...
Subjects
free text keywords: PEER SELECTION, SOCIAL TIES, Very Good, Business, Management and Accounting(all), JOINT LIABILITY, DESIGN, Group lending, Group leader, Moral hazard, Economics and Econometrics, Monitoring, ERITREA

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publication . Article . 2011

Group lending and the role of the group leader

Eijkel, van, R.; Hermes, N.; Lensink, B.W.;