Do Banks Have Private Information? Bank screening and ex-post small firm performance
AbstractThis 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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Bibliographic InfoPaper provided by Research Institute of Economy, Trade and Industry (RIETI) in its series Discussion papers with number 09016.
Length: 33 pages
Date of creation: Apr 2009
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-04-25 (All new papers)
- NEP-BAN-2009-04-25 (Banking)
- NEP-CTA-2009-04-25 (Contract Theory & Applications)
- NEP-EFF-2009-04-25 (Efficiency & Productivity)
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