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Composition, Interpretation and Memorisation of the Idiosyncratic Knowledge in Social Banking

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  • Amélie Artis
  • Simon Cornée

Abstract

Idiosyncratic knowledge, defined as the internal knowledge produced by a bank on each of its borrowers, is at the heart of the financial intermediation process. Nonetheless, the way bank managers use information in the credit-granting process remains a black box in the existing econometric studies. On the basis of a statistical textual analysis conducted on prior-to-creditcommittee notices of 52 credit files stemming from a social bank, our paper offers three main contributions. First, we show that the social bank under scrutiny produces a rich idiosyncratic knowledge mainly composed of soft information. Second, we reveal how the qualitative and the quantitative dimensions of the idiosyncratic knowledge are used when credit conditions are determined; hierarchy playing a key role in this process of interpretation. Third, our results indicate that the bank relies on an information system as well as on its agents’ cognitive abilities to memorise the idiosyncratic knowledge it produces. In this respect, our research points out deficiencies in the bank’s organisational memory and suggests some directions to remedy them.

Suggested Citation

  • Amélie Artis & Simon Cornée, 2017. "Composition, Interpretation and Memorisation of the Idiosyncratic Knowledge in Social Banking," Working Papers CEB 17-002, ULB -- Universite Libre de Bruxelles.
  • Handle: RePEc:sol:wpaper:2013/243549
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    More about this item

    Keywords

    Social banking; Idiosyncratic Knowledge; Hierarchy; Organisational Memory; Decision;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General

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