Sunshine and bank lending

Donghui Li, Xuanchang Qi, Jian Sun, Chun Yuan and Liyi Zhu

International Review of Financial Analysis, 2024, vol. 96, issue PB

Abstract: This study uses a unique proprietary loan-level dataset from a state-owned Chinese commercial bank to examine how sunshine-induced emotions influence loan pricing decisions made by high-level loan officers who would be punished for loan defaults. Our findings reveal that an increased intensity of sunshine at loan officers' workplace can increase loan pricing for borrowers. The result can be explained by the mood channel: sunshine induces a positive mood among loan officers leading to greater risk aversion in their loan pricing decisions, known as the mood maintenance effect. This effect is magnified for firms with high risk, high bank–firm information asymmetry, and in locations characterized by less bank competition. Our main results are still valid after taking into account various robustness issues and endogeneity concerns.

Keywords: Sunshine; Mood; Risk aversion; Bank loan pricing (search for similar items in EconPapers)
JEL-codes: G21 G32 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1057521924006100
Full text for ScienceDirect subscribers only

Related works:
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:eee:finana:v:96:y:2024:i:pb:s1057521924006100

DOI: 10.1016/j.irfa.2024.103678

Access Statistics for this article

International Review of Financial Analysis is currently edited by B.M. Lucey

More articles in International Review of Financial Analysis from Elsevier
Bibliographic data for series maintained by Catherine Liu ().