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Hierarchy of bank loan approval and loan performance

Author

Listed:
  • Giorgio Calcagnini

    (Università di Urbino Carlo Bo
    Politechnic University of Marche)

  • Rebel Cole

    (Florida Atlantic University)

  • Germana Giombini

    (Università di Urbino Carlo Bo
    Politechnic University of Marche)

  • Gloria Grandicelli

    (Università di Urbino Carlo Bo)

Abstract

This paper analyzes data from a regional Italian bank to provide new evidence on the relationship between who, within a bank, approves a loan and the subsequent performance of the loan. The size of the bank and its pool of clients, who are primarily small- and medium-size firms, comprises characteristics of both relationship-based and transaction-based lending technologies. Our key finding is that the probability of loan default increases as the loan approval decision is made at higher levels of the lending-decision hierarchy. This evidence supports the primacy of relationship-lending technology relative to transaction-based lending technology.

Suggested Citation

  • Giorgio Calcagnini & Rebel Cole & Germana Giombini & Gloria Grandicelli, 2018. "Hierarchy of bank loan approval and loan performance," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 35(3), pages 935-954, December.
    • Handle: RePEc:spr:epolit:v:35:y:2018:i:3:d:10.1007_s40888-018-0109-3
    DOI: 10.1007/s40888-018-0109-3
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    References listed on IDEAS

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    Cited by:

    1. Bellucci, Andrea & Borisov, Alexander & Giombini, Germana & Zazzaro, Alberto, 2023. "Information asymmetry, external certification, and the cost of bank debt," Journal of Corporate Finance, Elsevier, vol. 78(C).
    2. Giorgio Calcagnini & Federico Favaretto & Germana Giombini, 2024. "The effect of 2020 lockdown on bank internal ratings," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 51(2), pages 355-396, June.
    3. Bacchiocchi, Andrea & Bischi, Gian Italo & Giombini, Germana, 2022. "Non-performing loans, expectations and banking stability: A dynamic model," Chaos, Solitons & Fractals, Elsevier, vol. 157(C).
    4. Giorgio Calcagnini & Rebel Cole & Germana Giombini & Giuseppe Travaglini, 2019. "Bank Loan Deterioration: Is It All Fault of the Crisis?," Working Papers 1907, University of Urbino Carlo Bo, Department of Economics, Society & Politics - Scientific Committee - L. Stefanini & G. Travaglini, revised 2019.
    5. Andrea Bellucci & Alexander Borisov & Alberto Zazzaro, 2023. "Authority, Information, And Credit Terms: Evidence From Small Business Lending," Mo.Fi.R. Working Papers 184, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
    6. Giorgio Calcagnini & Germana Giombini & Edgar J. Sanchez Carrera, 2024. "Bank Lending Policies and Green Transition," Working Papers - Economics wp2024_16.rdf, Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa.

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    More about this item

    Keywords

    Lending technologies; SMEs funding; Soft and hard information; Relationship lending;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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