A Study on Asymmetric Information Problems in Taiwan’s Real Estate Mortgage Markets

• Main Authors: Yih-Bey Lin, 林益倍
• Other Authors: Larry Y. Tzeng
• Format: Others
• Language: zh-TW
• Published: 2011
• Online Access: http://ndltd.ncl.edu.tw/handle/32209156073761633417

博士 === 國立臺灣大學 === 財務金融學研究所 === 99 === By testing for the relationship between “loan-to-value ratio” and “borrower’s default probabilities”, this paper explores the problems of asymmetric information between banks and borrowers in Taiwan’s real estate mortgage markets. Using the extended alternative paired probit models of Chiappori and Salanié and the econometric models of Dionne et al., we first investigate whether asymmetric information exists in the markets. We further examine whether banks can use relative variables (e.g. interest rates and borrowers’ ages etc.) to control the asymmetric information problems. Chiappori and Salanié(2000) found no empirical support for the existence of asymmetric information in the liability insurance market of France. Dionne et al. (2001) showed that that there is no residual adverse selection on risk types in the automobile insurance portfolio studied. On the contrary, we find that opposite empirical evidence to support the existence of asymmetric information in Taiwan’s real estate mortgage markets. It seemly exists another pattern asymmetric information phenomenon. That is, the higher borrowers tend to select lower loan-to-value ratio contracts to reduce their default probabilities. Moreover, we also find that another pattern asymmetric information phenomenon mainly occur between banks and younger mortgagers subgroup, and banks could somehow control the asymmetric information problems by their pricing (interest rates) systems.