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On the Rationale of Bank Lending in Pre-Crisis Thailand

Listed author(s):
  • Menkhoff, Lukas
  • Chodechai Suwanaporn, Chodechai

Evidence from credit files is provided to examine bank lending determinants of Thai commercial banks. Their lending practice follows reasonable patterns as a standard set of variables, including indirect risk variables, explains much of the variance in interest rate spread. Reflecting institutional differences with mature markets, we find higher importance of relationship banking and risk control via credit availability. Information about later default reveals prudent relationship lending. However, banks could have made better use of available information about borrowers' riskiness. These findings do not support a general verdict of bad banking but indicate room to improve lending decisions.

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File URL: http://diskussionspapiere.wiwi.uni-hannover.de/pdf_bib/dp-326.pdf
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Paper provided by Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät in its series Hannover Economic Papers (HEP) with number dp-326.

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Length: 27 pages
Date of creation: Nov 2005
Handle: RePEc:han:dpaper:dp-326
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