This paper offers a possible explanation for the conflicting empirical results in the literature concerning the relation between loan risk and collateral. Specifically, we posit that different economic characteristics or types of collateral pledges may be associated with the empirical dominance...

The literature has documented a positive relationship between the use of credit scoring for small business loans and small business credit availability, broadly defined. However, this literature is hampered by the fact that all of the studies are based on a single 1998 survey of the very largest...

An important theoretical literature motivates collateral as a mechanism that mitigates adverse selection, credit rationing, and other inefficiencies that arise when borrowers hold ex ante private information. There is no clear empirical evidence regarding the central implication of this...

Collateral is a widely used, but not well understood, debt-contracting feature. Two broad strands of theoretical literature explain collateral as arising from the existence of either ex ante private information or ex post incentive problems between borrowers and lenders. However, the extant...

U.S. commercial banks are increasingly using credit scoring models to underwrite small business credits. This paper discusses this technology, evaluates the research findings on the effects of this technology on small business credit availability, and links these findings to a number of research...

This paper studies strategies pursued by banks in order to differentiate their services and soften competition. More specifically we analyse whether bank's ability to avoid losses, its capital ratio, or bank size can be used as strategic variables to make banks different and increase the...

This paper demonstrates the importance of using a flexible cost function specification when analyzing economies of scale and estimating the cost effect of banking mergers. The inflexibility of the translog cost function is illustrated and results are compared to more flexible spline and Fourier...

We introduce a model analyzing how asymmetric information problems in a bank-loan market may evolve over the age of a borrowing firm. The model predicts a life-cycle pattern for banks' interest rate markup. Young firms pay a low or negative markup, thereafter the markup increases until it falls...

We derive empirical implications from a stylized theoretical model of bankborrower relationships. Banks' interest rate markups are predicted to follow a life-cycle pattern over the borrowing firms' age. Due to endogenous bank monitoring by competing banks, borrowing firms initially face a low...

Stakeholder oriented governance systems are often thought to hamper efficiency. We show that social capital improves the viability of stakeholder-oriented firms in competitive markets. Studying exits from the population of Norwegian savings banks after deregulations, we find that banks located...