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Substitution or complementarity between Information "soft" and information "hard": why and which effect on bank profitability?

  • Herve Alexandre


    (DRM - Dauphine Recherches en Management - CNRS - Université Paris IX - Paris Dauphine)

  • Aymen Smondel


    (DRM - Dauphine Recherches en Management - CNRS - Université Paris IX - Paris Dauphine)

The Basel II committee set up directives encouraging banks to use internal scores in order to assess the risk of their customers. This new form of information competes with the existing ones. SMEs are most concerned by these new stakes, due to the lack of transparency. The aim of this paper is to understand the determinants of the choice between substitution and complementarity between the two types of information: "soft" and "hard", to test a potential effect of this choice on the banking performance and to describe which variables are involved in the decision-making process. The originality of this work is to try to quantify the information costs and to use it as a variable which is affecting the adopted choice.

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Paper provided by HAL in its series Post-Print with number halshs-00538326.

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Date of creation: 02 Jul 2012
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Publication status: Published in Journal of Modern Accounting and Auditing, 2012, 8 (6), pp.6-15
Handle: RePEc:hal:journl:halshs-00538326
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  1. Rebel A. Cole & Lawrence G. Goldberg & Lawrence J. White, 1997. "Cookie-Cutter versus Character: The Micro Structure of Small Business Lending by Large and Small Banks," New York University, Leonard N. Stern School Finance Department Working Paper Seires 98-022, New York University, Leonard N. Stern School of Business-.
  2. Jalal Akhavein & W. Scott Frame & Lawrence J. White, 2001. "The Diffusion of Financial Innovations: An Examination of The Adoption of Small Business Credit Scoring by Large Banking Organizations," Center for Financial Institutions Working Papers 01-19, Wharton School Center for Financial Institutions, University of Pennsylvania.
  3. DeYoung, Robert & Glennon, Dennis & Nigro, Peter, 2008. "Borrower-lender distance, credit scoring, and loan performance: Evidence from informational-opaque small business borrowers," Journal of Financial Intermediation, Elsevier, vol. 17(1), pages 113-143, January.
  4. Godbillon-Camus, Brigitte & Godlewski, Christophe, 2005. "Credit risk management in banks: Hard information, soft Information and manipulation," MPRA Paper 1873, University Library of Munich, Germany.
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