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

Author

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  • Herve Alexandre

    () (DRM - Dauphine Recherches en Management - Université Paris-Dauphine - CNRS - Centre National de la Recherche Scientifique)

  • Aymen Smondel

    () (DRM - Dauphine Recherches en Management - Université Paris-Dauphine - CNRS - Centre National de la Recherche Scientifique)

Abstract

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.

Suggested Citation

  • Herve Alexandre & Aymen Smondel, 2012. "Substitution or complementarity between Information "soft" and information "hard": why and which effect on bank profitability?," Post-Print halshs-00538326, HAL.
  • Handle: RePEc:hal:journl:halshs-00538326
    Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00538326
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    References listed on IDEAS

    as
    1. Jalal Akhavein & W. Scott Frame & Lawrence J. White, 2005. "The Diffusion of Financial Innovations: An Examination of the Adoption of Small Business Credit Scoring by Large Banking Organizations," The Journal of Business, University of Chicago Press, vol. 78(2), pages 577-596, March.
    2. 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.
    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. 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-.
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    More about this item

    Keywords

    Bank-SMEs relationship; soft information; hard information; Basel directives; soft information; hard information; credit decision-making process; bank performance; Bank-SMEs relationship.;

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