Big Loans to Small Businesses: Predicting Winners and Losers in an Entrepreneurial Lending Experiment
Gharad Bryan,
Dean Karlan and
Adam Osman
American Economic Review, 2024, vol. 114, issue 9, 2825-60
Abstract:
We experimentally study the impact of relatively large enterprise loans in Egypt. Larger loans generate small average impacts, but machine learning using psychometric data reveals "top performers" (those with the highest predicted treatment effects) substantially increase profits, while profits drop for poor performers. The large differences imply that lender credit allocation decisions matter for aggregate income, yet we find existing practice leads to substantial misallocation. We argue that some entrepreneurs are overoptimistic and squander the opportunities presented by larger loans by taking on too much risk, and show the promise of allocations based on entrepreneurial type relative to firm characteristics.
JEL-codes: C45 D22 G21 G32 L25 L26 O16 (search for similar items in EconPapers)
Date: 2024
References: Add references at CitEc
Citations:
Downloads: (external link)
https://www.aeaweb.org/doi/10.1257/aer.20220616 (application/pdf)
https://doi.org/10.3886/E192297V1 (text/html)
https://www.aeaweb.org/doi/10.1257/aer.20220616.appx (application/pdf)
https://www.aeaweb.org/doi/10.1257/aer.20220616.ds (application/zip)
Access to full text is restricted to AEA members and institutional subscribers.
Related works:
Working Paper: Big loans to small businesses: predicting winners and losers in an entrepreneurial lending experiment (2024) 
Working Paper: Big Loans to Small Businesses: Predicting Winners and Losers in an Entrepreneurial Lending Experiment (2022) 
Working Paper: Big Loans to Small Businesses: Predicting Winners and Losers in an Entrepreneurial Lending Experiment (2021) 
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:aea:aecrev:v:114:y:2024:i:9:p:2825-60
Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions
DOI: 10.1257/aer.20220616
Access Statistics for this article
American Economic Review is currently edited by Esther Duflo
More articles in American Economic Review from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().