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Truth and consequences: Bogus pipeline experiment in informal small business lending

Ulf Römer, Ron Weber, Oliver Musshoff and Calum Turvey

No 1702, DARE Discussion Papers from Georg-August University of Göttingen, Department of Agricultural Economics and Rural Development (DARE)

Abstract: The prevention of asymmetric information plays a major role in successful small business lending. The purpose of this research is to determine if small business applicants report their income information correctly when requesting a loan. Therefore, a randomized controlled trial bogus pipeline experiment was set up during a typical cash-flow analysis of a bank for small businesses in the Philippines. Results indicate that loan applicants of the treatment group reported a lower income, an effect which is most pronounced in the lowest income percentile. Moreover, our analyses reveal higher loan delinquencies in the control group.

Keywords: Small business finance; Income reporting; Asymmetric information; Bogus pipeline; Randomized controlled trial (search for similar items in EconPapers)
Date: 2017
New Economics Papers: this item is included in nep-ent, nep-exp and nep-mfd
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https://www.econstor.eu/bitstream/10419/156679/1/883572125.pdf (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:daredp:1702

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