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Does Alt Data Tilt Bargaining Power in Relationship Lending? Evidence from Borrowers' Premium Customer Base

Author

Listed:
  • Fred Asante

    (CU - Cornell University [Ithaca])

  • Albert Mensah

    (HEC Paris - Ecole des Hautes Etudes Commerciales)

Abstract

Relationship lenders extract rents by leveraging private borrower information unavailable to outside lenders. We examine whether alternative data (hereafter, "alt data") can narrow this gap. Using digital foot-traffic data, we construct an iOSshare measure capturing customer-affluence information that historically only relationship lenders could infer. Increases in this measure reduce loan spreads for relationship borrowers, after controlling for both ex-ante and ex-post changes in credit risk. The residual spreads beyond credit risk adjustments are consistent with a decline in economic rents. The results indicate that alt data diffuse borrowerspecific customer information to competing lenders, diminish informational holdup, and ultimately tilt bargaining power towards borrowers in relationship lending.

Suggested Citation

  • Fred Asante & Albert Mensah, 2025. "Does Alt Data Tilt Bargaining Power in Relationship Lending? Evidence from Borrowers' Premium Customer Base," Working Papers hal-05563052, HAL.
    • Handle: RePEc:hal:wpaper:hal-05563052
    DOI: 10.2139/ssrn.5954036
    as

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