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Differentiated Use of Small Business Credit Scoring by Relationship Lenders and Transactional Lenders: Evidence from firm-bank matched data in Japan

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  • HASUMI Ryo
  • HIRATA Hideaki
  • ONO Arito

Abstract

This paper examines the ex-post performance of small and medium-sized enterprises (SMEs) that obtained small business credit scoring (SBCS) loans. Using a unique Japanese firm-bank matched dataset, we identify whether an SME has obtained an SBCS loan and, if so, from which type of bank: a relationship lender or a transactional lender. We find that the ex-post probability of default after the SBCS loan was provided significantly increased for SMEs that obtained an SBCS loan from a transactional lender. We also find that the lending attitude of relationship lenders in the midst of the recent global financial crisis became much more severe if a transactional lender had extended an SBCS loan to a firm. These findings suggest that SBCS loans by a transactional lender are detrimental to a relationship lender's incentive to monitor SMEs and maintain relationships. In contrast, we do not find such detrimental effects for SBCS loans extended by a relationship lender.

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Bibliographic Info

Paper provided by Research Institute of Economy, Trade and Industry (RIETI) in its series Discussion papers with number 11070.

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Length: 43 pages
Date of creation: Oct 2011
Date of revision:
Handle: RePEc:eti:dpaper:11070

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Cited by:
  1. Ono, Arito & Uesugi, Iichiro, 2014. "SME Financing in Japan during the Global Financial Crisis: Evidence from Firm Surveys," HIT-REFINED Working Paper Series 6, Institute of Economic Research, Hitotsubashi University.
  2. 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.

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