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Small Business Credit Scoring: Evidence from Japan


  • HASUMI Ryo
  • HIRATA Hideaki


This paper studies the Japanese credit scoring market using data on 2,000 SMEs and a small business credit scoring model widely used in the market. After constructing a model for determining a bank's profit maximization, we find the optimum loan sizes and profit levels, and point out some lending pitfalls based on small business credit scoring. We show that solving the problems of adverse selection and window dressing are the most important things to do to increase the profitability of SBCS lending. In addition, omitted variable bias and transparency of financial statements are also important.

Suggested Citation

  • HASUMI Ryo & HIRATA Hideaki, 2010. "Small Business Credit Scoring: Evidence from Japan," Discussion papers 10029, Research Institute of Economy, Trade and Industry (RIETI).
  • Handle: RePEc:eti:dpaper:10029

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    Cited by:

    1. Silvia Del Prete & Marcello Pagnini & Paola Rossi & Valerio Vacca, 2017. "Lending organization and credit supply during the 2008-09 crisis," Temi di discussione (Economic working papers) 1108, Bank of Italy, Economic Research and International Relations Area.
    2. Ono, Arito & Hasumi, Ryo & Hirata, Hideaki, 2014. "Differentiated use of small business credit scoring by relationship lenders and transactional lenders: Evidence from firm–bank matched data in Japan," Journal of Banking & Finance, Elsevier, vol. 42(C), pages 371-380.
    3. Marcello Pagnini & Silvia Del Prete & Paola Rossi & Valerio Vacca, 2013. "Lending Organization and Credit Supply During the Crisis," ERSA conference papers ersa13p673, European Regional Science Association.

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