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Two-sided matching in the loan market

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  • Chen, Jiawei
  • Song, Kejun

Abstract

This paper investigates the matching between banks and firms in the loan market. We estimate a many-to-one two-sided matching model using the Fox (2010) matching maximum score estimator. Using data on the U.S. loan market from 2000 to 2003, we find evidence of positive assortative matching of sizes. Moreover, we show that banks and firms prefer partners that are geographically closer, giving support to the importance of physical proximity for information gathering and expertise sharing. We also show that banks and firms prefer partners with whom they had prior loans, indicating that prior loan relationship plays an important role in the selection of current partners.

Suggested Citation

  • Chen, Jiawei & Song, Kejun, 2013. "Two-sided matching in the loan market," International Journal of Industrial Organization, Elsevier, vol. 31(2), pages 145-152.
    • Handle: RePEc:eee:indorg:v:31:y:2013:i:2:p:145-152
    DOI: 10.1016/j.ijindorg.2012.12.002
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    References listed on IDEAS

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    More about this item

    Keywords

    Loan market; Two-sided matching; Maximum score estimator;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory

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