What’s Special About Banking in Italy? Lending Technologies, Complementarity, and Impact of Soft Information

This paper investigates the firm-main bank relationship in a sample of Italy's SMEs. The findings suggest that banks lend to SMEs via different lending technologies. These results support the hardening-of-soft-information view, whereby also transactional lenders might somehow use difficult to codify qualitative information – traditionally believed a prerogative of relational banks – on borrowing enterprises. However, the soft information lowers (raises) the probability of rationing if the firm's main bank uses relationship (transactional) lending technologies. Thus, the way the soft information becomes embodied in the lending decision might still differ between relational vs. transactional banks