Financial institutions (such as commercial banks and finance companies

Financial institutions (such as commercial banks and finance companies) play an important role in mitigating information asymmetry problems in financial markets because:

a. they require a potential borrower to disclose confidential information about their project to the public before they are approved for a loan.
b. they regularly receive private information from the firm about the quality of the firm’s projects, and yet will keep such information confidential.
c. they lend only to firms that do not suffer from information asymmetry problems.

ANSWER

B