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Are concentrated banks better informed than diversified ones?

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  • Strahan, Philip E.

Abstract

This paper discusses evidence that large, diversified banks lend using `hard' information measures, such as audited financial statements. Structural changes toward larger and more diversified banks may have left some segments of credit markets - those depending on investment in `soft' information - under-served. These trends accelerated following the Financial Crisis. At the same time, bank lending to small businesses, which typically can only supply soft information, has been slow to recover from the Crisis. These trends are worrying because entry of focused banks, the normal market mechanism to counteract such a trend, has been absent since the Crisis.

Suggested Citation

  • Strahan, Philip E., 2017. "Are concentrated banks better informed than diversified ones?," Journal of Accounting and Economics, Elsevier, vol. 64(2), pages 278-283.
    • Handle: RePEc:eee:jaecon:v:64:y:2017:i:2:p:278-283
    DOI: 10.1016/j.jacceco.2017.07.003
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    References listed on IDEAS

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    Cited by:

    1. José Liberti & Jason Sturgess & Andrew Sutherland, 2018. "Economics of Voluntary Information Sharing," Working Papers 869, Queen Mary University of London, School of Economics and Finance.
    2. Sutherland, Andrew G., 2020. "Technology is changing lending: Implications for research," Journal of Accounting and Economics, Elsevier, vol. 70(2).

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    Keywords

    Small business lending; Soft information;

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