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Do Banks Have Private Information? Bank screening and ex-post small firm performance

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  • HOSONO Kaoru
  • XU Peng

Abstract

This paper examines whether commercial banks screen loan applications based on private information on firms' future profitability, and consequently how banks' ex-ante private information and screening decisions affect firms' ex-post profitability. Using a dataset of banks' loan application screenings and the ex-post firm performance for Japanese SMEs, we obtained strong evidences suggesting that banks' ex-ante private information was related to firms' ex-post performance. We found this relationship to be especially strong for small, mature firms, which supports the relationship-lending hypothesis.

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  • HOSONO Kaoru & XU Peng, 2009. "Do Banks Have Private Information? Bank screening and ex-post small firm performance," Discussion papers 09016, Research Institute of Economy, Trade and Industry (RIETI).
    • Handle: RePEc:eti:dpaper:09016
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    Cited by:

    1. HOSONO Kaoru, 2009. "Financial Crisis, Firm Dynamics and Aggregate Productivity in Japan," Discussion papers 09012, Research Institute of Economy, Trade and Industry (RIETI).

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