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Hierarchy of bank loan approval and loan performance

Giorgio Calcagnini (), Rebel Cole, Germana Giombini and Gloria Grandicelli
Additional contact information
Rebel Cole: Florida Atlantic University
Germana Giombini: Università di Urbino Carlo Bo
Gloria Grandicelli: Università di Urbino Carlo Bo

Economia Politica: Journal of Analytical and Institutional Economics, 2018, vol. 35, issue 3, 935-954

Abstract: Abstract This paper analyzes data from a regional Italian bank to provide new evidence on the relationship between who, within a bank, approves a loan and the subsequent performance of the loan. The size of the bank and its pool of clients, who are primarily small- and medium-size firms, comprises characteristics of both relationship-based and transaction-based lending technologies. Our key finding is that the probability of loan default increases as the loan approval decision is made at higher levels of the lending-decision hierarchy. This evidence supports the primacy of relationship-lending technology relative to transaction-based lending technology.

Keywords: Lending technologies; SMEs funding; Soft and hard information; Relationship lending (search for similar items in EconPapers)
JEL-codes: G21 G28 L25 O12 O16 (search for similar items in EconPapers)
Date: 2018
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