Do Banks Have Private Information? Bank screening and ex-post small firm performance

Kaoru Hosono and XU Peng

Discussion papers from Research Institute of Economy, Trade and Industry (RIETI)

Abstract: This paper examines whether commercial banks screen loan applications based on private information on firms' future profitability, and consequently how banks' ex-ante private information and screening decisions affect firms' ex-post profitability. Using a dataset of banks' loan application screenings and the ex-post firm performance for Japanese SMEs, we obtained strong evidences suggesting that banks' ex-ante private information was related to firms' ex-post performance. We found this relationship to be especially strong for small, mature firms, which supports the relationship-lending hypothesis.

New Economics Papers: this item is included in nep-ban, nep-cta and nep-eff
Date: 2009-04
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Persistent link: http://EconPapers.repec.org/RePEc:eti:dpaper:09016

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