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Data versus Collateral

Author

Listed:
  • Leonardo Gambacorta
  • Yiping Huang
  • Zhenhua Li
  • Han Qiu
  • Shu Chen

Abstract

Using a unique dataset of more than 2 million Chinese firms that received credit from both an important big tech firm (Ant Group) and traditional commercial banks, this paper investigates how different forms of credit correlate with local economic activity, house prices, and firm characteristics. We find that big tech credit does not correlate with local business conditions and house prices when controlling for demand factors, but reacts strongly to changes in firm characteristics, such as transaction volumes and network scores used to calculate firm credit ratings. By contrast, both secured and unsecured bank credit react significantly to local house prices, which incorporate useful information on the environment in which clients operate and on their creditworthiness. This evidence implies that the wider use of big tech credit could reduce the importance of the collateral channel but, at the same time, make lending more reactive to changes in firms’ business activity.

Suggested Citation

  • Leonardo Gambacorta & Yiping Huang & Zhenhua Li & Han Qiu & Shu Chen, 2023. "Data versus Collateral," Review of Finance, European Finance Association, vol. 27(2), pages 369-398.
    • Handle: RePEc:oup:revfin:v:27:y:2023:i:2:p:369-398.
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    File URL: http://hdl.handle.net/10.1093/rof/rfac022
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    More about this item

    Keywords

    Big tech; Big data; Collateral; Banks; Asymmetric information; Credit markets;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

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