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What Do Banks Evaluate When They Screen Borrowers? Soft Information, Hard Information and Collateral

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  • Hirofumi Uchida

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  • Hirofumi Uchida, 2011. "What Do Banks Evaluate When They Screen Borrowers? Soft Information, Hard Information and Collateral," Journal of Financial Services Research, Springer;Western Finance Association, vol. 40(1), pages 29-48, October.
    • Handle: RePEc:kap:jfsres:v:40:y:2011:i:1:p:29-48
    DOI: 10.1007/s10693-010-0100-9
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    8. Allen N. Berger & Gregory F. Udell, 2002. "Small Business Credit Availability and Relationship Lending: The Importance of Bank Organisational Structure," Economic Journal, Royal Economic Society, vol. 112(477), pages 32-53, February.
    9. Pietro Alessandrini & Andrea F. Presbitero & Alberto Zazzaro, 2009. "Banks, Distances and Firms' Financing Constraints," Review of Finance, European Finance Association, vol. 13(2), pages 261-307.
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    11. Cole, Rebel A. & Goldberg, Lawrence G. & White, Lawrence J., 2004. "Cookie Cutter vs. Character: The Micro Structure of Small Business Lending by Large and Small Banks," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 39(2), pages 227-251, June.
    12. Jose M. Liberti & Atif R. Mian, 2009. "Estimating the Effect of Hierarchies on Information Use," The Review of Financial Studies, Society for Financial Studies, vol. 22(10), pages 4057-4090, October.
    13. Uchida, Hirofumi & Udell, Gregory F. & Yamori, Nobuyoshi, 2012. "Loan officers and relationship lending to SMEs," Journal of Financial Intermediation, Elsevier, vol. 21(1), pages 97-122.
    14. Gary Gorton, 2009. "The Subprime Panic," European Financial Management, European Financial Management Association, vol. 15(1), pages 10-46, January.
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    16. Jeremy C. Stein, 2002. "Information Production and Capital Allocation: Decentralized versus Hierarchical Firms," Journal of Finance, American Finance Association, vol. 57(5), pages 1891-1921, October.
    17. Jonathan Scott, 2004. "Small Business and the Value of Community Financial Institutions," Journal of Financial Services Research, Springer;Western Finance Association, vol. 25(2), pages 207-230, April.
    18. repec:ucp:bkecon:9780226316529 is not listed on IDEAS
    19. Boot, Arnoud W. A., 2000. "Relationship Banking: What Do We Know?," Journal of Financial Intermediation, Elsevier, vol. 9(1), pages 7-25, January.
    20. Petersen, Mitchell A & Rajan, Raghuram G, 1994. "The Benefits of Lending Relationships: Evidence from Small Business Data," Journal of Finance, American Finance Association, vol. 49(1), pages 3-37, March.
    21. Gary Gorton, 2009. "The Subprime Panic," European Financial Management, European Financial Management Association, vol. 15(1), pages 10-46, January.
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    Citations

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    Cited by:

    1. Yaldız Hanedar, Elmas & Broccardo, Eleonora & Bazzana, Flavio, 2014. "Collateral requirements of SMEs: The evidence from less-developed countries," Journal of Banking & Finance, Elsevier, vol. 38(C), pages 106-121.
    2. Benjamin Hemingway, 2022. "Banking Regulation and Collateral Screening in a Model of Information Asymmetry," Journal of Financial Services Research, Springer;Western Finance Association, vol. 61(3), pages 367-405, June.
    3. Mark Ojeme & Andrew Robson & Nigel Coates, 2016. "Nigerian SMEs: Commitment and loyalty to their banks," Journal of Financial Services Marketing, Palgrave Macmillan, vol. 21(4), pages 325-339, December.
    4. Mkhaiber, Achraf & Werner, Richard A., 2021. "The relationship between bank size and the propensity to lend to small firms: New empirical evidence from a large sample," Journal of International Money and Finance, Elsevier, vol. 110(C).
    5. Backman , Mikaela & Wallin, Tina, 2017. "Access to financial intermediaries and external capital acquisition," Working Paper Series in Economics and Institutions of Innovation 454, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
    6. Elmas Yaldiz Hanedar & Eleonora Broccardo & Flavio Bazzana, 2012. "Collateral Requirements of SMEs:The Evidence from Less–Developed Countries," Centro Studi di Banca e Finanza (CEFIN) (Center for Studies in Banking and Finance) 0034, Universita di Modena e Reggio Emilia, Dipartimento di Economia "Marco Biagi".
    7. Nguyen, Nhung & Luu, Nhung, 2013. "Determinants of Financing Pattern and Access to Formal -Informal Credit: The Case of Small and Medium Sized Enterprises in Viet Nam," MPRA Paper 81868, University Library of Munich, Germany, revised May 2013.
    8. Haoyu Gao & Junbo Wang & Xiaoguang Yang & Lin Zhao, 2020. "Borrower Opacity and Loan Performance: Evidence from China," Journal of Financial Services Research, Springer;Western Finance Association, vol. 57(2), pages 181-206, April.
    9. Durguner, Sena, 2017. "Do borrower-lender relationships still matter for small business loans?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 50(C), pages 98-118.
    10. Wang, Yao & Drabek, Zdenek & Wang, Zhengwei, 2022. "The role of social and psychological related soft information in credit analysis: Evidence from a Fintech Company," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 96(C).
    11. Hussain, Inayat & Durand, Robert B. & Harris, Mark N., 2021. "Relationship lending: A source of support or a means of exploitation?," Global Finance Journal, Elsevier, vol. 48(C).
    12. UCHIDA Hirofumi, 2016. "A Comparison of the Lending Technologies between Private and Public Banks," Discussion papers 16023, Research Institute of Economy, Trade and Industry (RIETI).
    13. Fergal McCann & James Carroll, 2019. "Observables and Residuals: Exploring Cross-Border Differences in SME Borrowing Costs," Journal of Financial Services Research, Springer;Western Finance Association, vol. 56(2), pages 167-184, October.
    14. Ludovico Maria Cocco & Elisa Cavezzali & Ugo Rigoni & Giorgia Simion, 2024. "How does soft information on the causes of default affect debt renegotiation? The Italian evidence," Annals of Finance, Springer, vol. 20(1), pages 45-89, March.
    15. Calum Turvey & Xiaolan Xu & Rong Kong & Ying Cao, 2014. "Attitudinal Asymmetries and the Lender-Borrower Relationship: Survey Results on Farm Lending in Shandong, China," Journal of Financial Services Research, Springer;Western Finance Association, vol. 46(2), pages 115-135, October.
    16. Yoshiaki Ogura & Hirofumi Uchida, 2014. "Bank Consolidation and Soft Information Acquisition in Small Business Lending," Journal of Financial Services Research, Springer;Western Finance Association, vol. 45(2), pages 173-200, April.
    17. Mikaela Backman & Tina Wallin, 2018. "Access to banks and external capital acquisition: perceived innovation obstacles," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 61(1), pages 161-187, July.
    18. Dimuthu Ratnadiwakara, 2021. "Collateral Value and Strategic Default: Evidence from Auto Loans," Journal of Financial Services Research, Springer;Western Finance Association, vol. 59(3), pages 209-240, June.
    19. Zhichao Luo & Pingyu Hsu & Ni Xu, 2020. "SME Default Prediction Framework with the Effective Use of External Public Credit Data," Sustainability, MDPI, vol. 12(18), pages 1-18, September.
    20. Chen, Minju & Wang, Chengbin, 2024. "How business model innovation facilitates microcredit in balancing social mission with commercial performance - evidence from local commercial banks," Technological Forecasting and Social Change, Elsevier, vol. 202(C).
    21. Antti Fredriksson & Daniela Maresch & Andrea Moro, 2017. "Much ado about nothing? Interest and non-interest products and services: Their impact on small banks’ margins," Cogent Economics & Finance, Taylor & Francis Journals, vol. 5(1), pages 1339771-133, January.
    22. Francesco Cohen & Alessandro Fedele & Paolo M. Panteghini, 2016. "Corporate taxation and financial strategies under asymmetric information," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 33(1), pages 9-34, April.
    23. Nguyet CAO Thi Khanh, 2016. "What factors determine whether SMEs obtain credit from formal credit market? The case of Vietnam," APIR Discussion Paper Series 1005634, Asia Pacific Institute of Research.
    24. Giorgio Calcagnini & Fabio Farabullini & Germana Giombini, 2014. "The impact of guarantees on bank loan interest rates," Applied Financial Economics, Taylor & Francis Journals, vol. 24(6), pages 397-412, March.
    25. Daisuke Tsuruta, 2020. "Can banks monitor small business borrowers effectively using hard information?," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 60(4), pages 4291-4330, December.

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    More about this item

    Keywords

    Bank lending; Real estate collateral; Financial statements; Relationship lending; Small and medium-sized enterprises; G21; L14; D82; L22;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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