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Small Business Credit Scoring: Evidence from Japan

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  • HASUMI Ryo
  • HIRATA Hideaki

Abstract

This paper studies the Japanese credit scoring market using data on 2,000 SMEs and a small business credit scoring model widely used in the market. After constructing a model for determining a bank's profit maximization, we find the optimum loan sizes and profit levels, and point out some lending pitfalls based on small business credit scoring. We show that solving the problems of adverse selection and window dressing are the most important things to do to increase the profitability of SBCS lending. In addition, omitted variable bias and transparency of financial statements are also important.

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File URL: http://www.rieti.go.jp/jp/publications/dp/10e029.pdf
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Bibliographic Info

Paper provided by Research Institute of Economy, Trade and Industry (RIETI) in its series Discussion papers with number 10029.

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Length: 25 pages
Date of creation: Jun 2010
Date of revision:
Handle: RePEc:eti:dpaper:10029

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Cited by:
  1. Hasumi, Ryo & Hirata, Hideaki & Ono, Arito, 2012. "Differentiated Use of Small Business Credit Scoring by Relationship Lenders and Transactional Lenders: Evidence from Firm-Bank Matched Data in Japan," Working Paper Series 23, Center for Interfirm Network, Institute of Economic Research, Hitotsubashi University.
  2. Marcello Pagnini & Silvia Del Prete & Paola Rossi & Valerio Vacca, 2013. "Lending Organization and Credit Supply During the Crisis," ERSA conference papers ersa13p673, European Regional Science Association.

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