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Credit ratings, private information, and bank monitoring ability

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  • Nakamura, Leonard I.
  • Roszbach, Kasper

Abstract

In this paper, we use credit rating data from two large Swedish banks to elicit evidence on banks’ loan monitoring ability. For these banks, our tests reveal that banks’ internal credit ratings indeed include valuable private information from monitoring, as theory suggests. Banks’ private information increases with the size of loans.

Suggested Citation

  • Nakamura, Leonard I. & Roszbach, Kasper, 2018. "Credit ratings, private information, and bank monitoring ability," Journal of Financial Intermediation, Elsevier, vol. 36(C), pages 58-73.
  • Handle: RePEc:eee:jfinin:v:36:y:2018:i:c:p:58-73
    DOI: 10.1016/j.jfi.2017.11.001
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    References listed on IDEAS

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    Cited by:

    1. Stijn Claessens & Andy Law & Teng Wang, 2018. "How do credit ratings affect bank lending under capital constraints?," BIS Working Papers 747, Bank for International Settlements.

    More about this item

    Keywords

    Monitoring; Banks; Credit bureau; Private information; Public information; Ratings; Regulation; Supervision; Overconfidence;

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation

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