Transaction cost theory typically attributes market imperfections to bounded rationality and lock in, whilst internalization theory emphasises asymmetric information and weaknesses in property rights.

Some concerns about management buyouts are that the asymmetric information possessed by management may offer them unfair advantage relative to current owners.

Through group lending, situations of adverse selection and moral hazard due to asymmetric information are better managed.

In terms of asymmetric information assumption, borrowers are better informed than lenders about the persistence of their output shocks.

They argue that financial accelerator results from changes in credit market conditions, which affect the intrinsic costs of borrowing and lending associated with asymmetric information.