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Cookie Cutter vs. Character: The Micro Structure of Small Business Lending by Large and Small Banks


  • Cole, Rebel A.
  • Goldberg, Lawrence G.
  • White, Lawrence J.


The informational opacity of small businesses makes them an interesting area for the study of banks' lending practices and procedures. We use data from a survey of small businesses to analyze the micro level differences in the loan approval processes of large and small banks. We provide evidence that large banks ($1 billion or more in assets) employ standard criteria obtained from financial statements in the loan decision process, whereas small banks rely to a greater extent on information about the character of the borrower. These cookie-cutter and character approaches are compatible with the incentives and environments facing large and small banks.

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  • Cole, Rebel A. & Goldberg, Lawrence G. & White, Lawrence J., 2004. "Cookie Cutter vs. Character: The Micro Structure of Small Business Lending by Large and Small Banks," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 39(02), pages 227-251, June.
  • Handle: RePEc:cup:jfinqa:v:39:y:2004:i:02:p:227-251_00

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