Unless otherwise defined, the fact that when banks lend to less viable companies, they can lend less, or lend on less favorable terms, to companies that are more profitable. – The bad companies suck up the given and not arbitrarily multipliable credit volume. As a result – the money and thus the scarce production factors, limited to a given stock, do not reach the best host (most favorable allocation of scarce resources), and – the economy as a whole suffers a loss. – See adverse selection, risk aversion. – Cf. IMF: Economic Issues 31: Corporate Sector Restructuring.
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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
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