This paper investigates the importance and the determinants of trust in a lending situation using an online controlled experiment. We find that communication can facilitate collaboration between lenders and borrowers through three channels of trust: 1) an information channel, 2) a preference...

Using a novel dataset of firm-level perceived trustworthiness from the news media and social media, we find that lending banks charge significantly higher loan spread on firms with lower trustworthiness. Loans to these firms also tend to have shorter loan maturities, more financial covenants,...

This study investigates the effect of similarity in risk attitudes between lenders and borrowers on loan contracting. We find that when banks and lenders have similar risk attitudes they are more likely to sign loan contracts. Moreover, such contracts are associated with lower spreads, longer...

I examine the impact of corporate Environmental, Social, and Governance (ESG) profiles on the formation of lending relationships between firms and banks, and the implications of this matching for loan pricing. I find that high ESG firms are more likely to receive a bank loan, and their loans...

We study how lenders respond to excessive optimism in the corporate sector. Our identification relies on plausibly exogenous variation in optimism across areas in Italy. We document that firms in optimistic areas hold favorable views about their own business, and that they are more likely to...

Although psychometric features have been considered for alternative credit scoring, they have not yet been applied to peer-to-peer (P2P) lending because such information is not available on platforms. This study proposed an alternative credit scoring model for P2P lending by extracting typical...

We explore the sources of racial disparities in small business lending by studying the $806 billion Paycheck Protection Program (PPP), which was designed to support small business jobs during the COVID-19 pandemic. PPP loans were administered by private lenders but federally guaranteed, largely...

By enabling smaller loans, broader geographic reach, and less human bias in decision-making, process automation may reduce racial disparities in access to financial services. We find evidence for all three channels using a setting where private lenders faced no credit risk but decided who to...

Why do residential mortgages carry a fixed or an adjustable interest rate? To answer this question we study unique data from 103 banks belonging to 73 different banking groups across twelve countries in the euro area. To explain the large cross-country and time variation observed, we distinguish...

We explore individual lender behaviour on Renrendai.com, a leading Chinese peer-to-peer (P2P) crowdlending platform. Using a sample of roughly 5 million investor-loan-hour observations and applying a high-dimension fixed effect estimator, we establish evidence of herding behaviour: the investors...