The Ability of Banks to Lend to Informationally Opaque Small Businesses

Consolidation of the banking industry is shifting assets into larger institutions that often operate in many nations. Large international financial institutions are geared toward serving large wholesale customers. How does this affect the banking s...

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Main Authors:	Berger, Allen N., Klapper, Leora, Udell, Gregory F.
Format:	Policy Research Working Paper
Language:	English en_US
Published:	World Bank, Washington, DC 2014
Subjects:	AGRICULTURE ALLOCATION OF RESOURCES BALANCE SHEET BANK ASSETS BANK CAPITAL BANK HOLDING COMPANIES BANK LENDING BANK MERGERS BANK PORTFOLIOS BANK RISK BANK RISK TAKING BANK SIZE BANK STRUCTURE BANKING CRISES BANKING CRISIS BANKING INDUSTRY BANKING RELATIONSHIPS BANKING SECTOR BANKING SYSTEM BANKING SYSTEMS BANKS BASLE ACCORD BORROWER BORROWING BORROWING COSTS CAPITAL STANDARDS COMMERCIAL BANKS COMPARATIVE ADVANTAGE COMPARATIVE ADVANTAGES COMPETITORS CONSOLIDATION CONTAGION COSTS OF BORROWING CREDIT POLICIES DEBT DEPOSITORS DEPOSITS DISECONOMIES DISTRESSED BANKS EMPIRICAL ANALYSIS EMPLOYMENT EUROPEAN CENTRAL BANK FEDERAL RESERVE SYSTEM FINANCIAL CRISES FINANCIAL CRISIS FINANCIAL DISTRESS FINANCIAL INFORMATION FINANCIAL INSTITUTIONS FINANCIAL INTERMEDIARIES FINANCIAL RATIOS FINANCIAL SERVICES FINANCIAL TRANSACTIONS FOREIGN ENTRY GDP INCOME STATEMENTS INFLATION INFORMATION ACQUISITION INSOLVENCY INSURANCE INTEREST RATE INTEREST RATES LENDER LENDERS LENDING BEHAVIOR LENDING SERVICES LENDING TERMS LOAN LOAN APPLICATIONS LOAN PORTFOLIOS LOW INTEREST RATES MARKET DISCIPLINE NONPERFORMING LOANS PATENTS PREDICTIONS PRESENT VALUE PRIVATIZATION PROFITABILITY PROPRIETARY INFORMATION PRUDENTIAL SUPERVISION RELATIONSHIP LENDING RISK TAKING SMALL BANKS SMALL BUSINESS SUBSIDIARY SUPPLIERS TRADE BARRIERS TRANSACTIONS COSTS WEALTH
Online Access:	http://documents.worldbank.org/curated/en/2001/08/1561491/ability-banks-lend-informationally-opaque-small-businesses http://hdl.handle.net/10986/19567

id	okr-10986-19567
recordtype	oai_dc
spelling	okr-10986-195672021-04-23T14:03:43Z The Ability of Banks to Lend to Informationally Opaque Small Businesses Berger, Allen N. Klapper, Leora Udell, Gregory F. AGRICULTURE ALLOCATION OF RESOURCES BALANCE SHEET BANK ASSETS BANK CAPITAL BANK HOLDING COMPANIES BANK LENDING BANK MERGERS BANK PORTFOLIOS BANK RISK BANK RISK TAKING BANK SIZE BANK STRUCTURE BANKING CRISES BANKING CRISIS BANKING INDUSTRY BANKING RELATIONSHIPS BANKING SECTOR BANKING SYSTEM BANKING SYSTEMS BANKS BASLE ACCORD BORROWER BORROWING BORROWING COSTS CAPITAL STANDARDS COMMERCIAL BANKS COMPARATIVE ADVANTAGE COMPARATIVE ADVANTAGES COMPETITORS CONSOLIDATION CONTAGION COSTS OF BORROWING CREDIT POLICIES DEBT DEPOSITORS DEPOSITS DISECONOMIES DISTRESSED BANKS EMPIRICAL ANALYSIS EMPLOYMENT EUROPEAN CENTRAL BANK FEDERAL RESERVE SYSTEM FINANCIAL CRISES FINANCIAL CRISIS FINANCIAL DISTRESS FINANCIAL INFORMATION FINANCIAL INSTITUTIONS FINANCIAL INTERMEDIARIES FINANCIAL RATIOS FINANCIAL SERVICES FINANCIAL TRANSACTIONS FOREIGN ENTRY GDP INCOME STATEMENTS INFLATION INFORMATION ACQUISITION INSOLVENCY INSURANCE INTEREST RATE INTEREST RATES LENDER LENDERS LENDING BEHAVIOR LENDING SERVICES LENDING TERMS LOAN LOAN APPLICATIONS LOAN PORTFOLIOS LOW INTEREST RATES MARKET DISCIPLINE NONPERFORMING LOANS PATENTS PREDICTIONS PRESENT VALUE PRIVATIZATION PROFITABILITY PROPRIETARY INFORMATION PRUDENTIAL SUPERVISION RELATIONSHIP LENDING RISK TAKING SMALL BANKS SMALL BUSINESS SUBSIDIARY SUPPLIERS TRADE BARRIERS TRANSACTIONS COSTS WEALTH Consolidation of the banking industry is shifting assets into larger institutions that often operate in many nations. Large international financial institutions are geared toward serving large wholesale customers. How does this affect the banking system's ability to lend to informationally opaque small businesses? The authors test hypotheses about the effects of bank size, foreign ownership, and distress on lending to informationally opaque small firms, using a rich new data set on Argentinean banks, firms, and loans. They also test hypotheses about borrowing from a single bank versus borrowing from several banks. Their results suggest that large and foreign-owned institutions may have difficulty extending relationship loans to opaque small firms, especially if small businesses are delinquent in repaying their loans. Bank distress resulting from lax prudential supervision and regulation appears to have no greater effect on small borrowers than on large borrowers, although even small firms may react to bank distress by borrowing from multiple banks, despite raising borrowing costs and destroying some of the benefits of exclusive lending relationships. 2014-08-21T17:37:19Z 2014-08-21T17:37:19Z 2001-08 http://documents.worldbank.org/curated/en/2001/08/1561491/ability-banks-lend-informationally-opaque-small-businesses http://hdl.handle.net/10986/19567 English en_US Policy Research Working Paper;No. 2656 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English en_US
topic	AGRICULTURE ALLOCATION OF RESOURCES BALANCE SHEET BANK ASSETS BANK CAPITAL BANK HOLDING COMPANIES BANK LENDING BANK MERGERS BANK PORTFOLIOS BANK RISK BANK RISK TAKING BANK SIZE BANK STRUCTURE BANKING CRISES BANKING CRISIS BANKING INDUSTRY BANKING RELATIONSHIPS BANKING SECTOR BANKING SYSTEM BANKING SYSTEMS BANKS BASLE ACCORD BORROWER BORROWING BORROWING COSTS CAPITAL STANDARDS COMMERCIAL BANKS COMPARATIVE ADVANTAGE COMPARATIVE ADVANTAGES COMPETITORS CONSOLIDATION CONTAGION COSTS OF BORROWING CREDIT POLICIES DEBT DEPOSITORS DEPOSITS DISECONOMIES DISTRESSED BANKS EMPIRICAL ANALYSIS EMPLOYMENT EUROPEAN CENTRAL BANK FEDERAL RESERVE SYSTEM FINANCIAL CRISES FINANCIAL CRISIS FINANCIAL DISTRESS FINANCIAL INFORMATION FINANCIAL INSTITUTIONS FINANCIAL INTERMEDIARIES FINANCIAL RATIOS FINANCIAL SERVICES FINANCIAL TRANSACTIONS FOREIGN ENTRY GDP INCOME STATEMENTS INFLATION INFORMATION ACQUISITION INSOLVENCY INSURANCE INTEREST RATE INTEREST RATES LENDER LENDERS LENDING BEHAVIOR LENDING SERVICES LENDING TERMS LOAN LOAN APPLICATIONS LOAN PORTFOLIOS LOW INTEREST RATES MARKET DISCIPLINE NONPERFORMING LOANS PATENTS PREDICTIONS PRESENT VALUE PRIVATIZATION PROFITABILITY PROPRIETARY INFORMATION PRUDENTIAL SUPERVISION RELATIONSHIP LENDING RISK TAKING SMALL BANKS SMALL BUSINESS SUBSIDIARY SUPPLIERS TRADE BARRIERS TRANSACTIONS COSTS WEALTH
spellingShingle	AGRICULTURE ALLOCATION OF RESOURCES BALANCE SHEET BANK ASSETS BANK CAPITAL BANK HOLDING COMPANIES BANK LENDING BANK MERGERS BANK PORTFOLIOS BANK RISK BANK RISK TAKING BANK SIZE BANK STRUCTURE BANKING CRISES BANKING CRISIS BANKING INDUSTRY BANKING RELATIONSHIPS BANKING SECTOR BANKING SYSTEM BANKING SYSTEMS BANKS BASLE ACCORD BORROWER BORROWING BORROWING COSTS CAPITAL STANDARDS COMMERCIAL BANKS COMPARATIVE ADVANTAGE COMPARATIVE ADVANTAGES COMPETITORS CONSOLIDATION CONTAGION COSTS OF BORROWING CREDIT POLICIES DEBT DEPOSITORS DEPOSITS DISECONOMIES DISTRESSED BANKS EMPIRICAL ANALYSIS EMPLOYMENT EUROPEAN CENTRAL BANK FEDERAL RESERVE SYSTEM FINANCIAL CRISES FINANCIAL CRISIS FINANCIAL DISTRESS FINANCIAL INFORMATION FINANCIAL INSTITUTIONS FINANCIAL INTERMEDIARIES FINANCIAL RATIOS FINANCIAL SERVICES FINANCIAL TRANSACTIONS FOREIGN ENTRY GDP INCOME STATEMENTS INFLATION INFORMATION ACQUISITION INSOLVENCY INSURANCE INTEREST RATE INTEREST RATES LENDER LENDERS LENDING BEHAVIOR LENDING SERVICES LENDING TERMS LOAN LOAN APPLICATIONS LOAN PORTFOLIOS LOW INTEREST RATES MARKET DISCIPLINE NONPERFORMING LOANS PATENTS PREDICTIONS PRESENT VALUE PRIVATIZATION PROFITABILITY PROPRIETARY INFORMATION PRUDENTIAL SUPERVISION RELATIONSHIP LENDING RISK TAKING SMALL BANKS SMALL BUSINESS SUBSIDIARY SUPPLIERS TRADE BARRIERS TRANSACTIONS COSTS WEALTH Berger, Allen N. Klapper, Leora Udell, Gregory F. The Ability of Banks to Lend to Informationally Opaque Small Businesses
relation	Policy Research Working Paper;No. 2656
description	Consolidation of the banking industry is shifting assets into larger institutions that often operate in many nations. Large international financial institutions are geared toward serving large wholesale customers. How does this affect the banking system's ability to lend to informationally opaque small businesses? The authors test hypotheses about the effects of bank size, foreign ownership, and distress on lending to informationally opaque small firms, using a rich new data set on Argentinean banks, firms, and loans. They also test hypotheses about borrowing from a single bank versus borrowing from several banks. Their results suggest that large and foreign-owned institutions may have difficulty extending relationship loans to opaque small firms, especially if small businesses are delinquent in repaying their loans. Bank distress resulting from lax prudential supervision and regulation appears to have no greater effect on small borrowers than on large borrowers, although even small firms may react to bank distress by borrowing from multiple banks, despite raising borrowing costs and destroying some of the benefits of exclusive lending relationships.
format	Publications & Research :: Policy Research Working Paper
author	Berger, Allen N. Klapper, Leora Udell, Gregory F.
author_facet	Berger, Allen N. Klapper, Leora Udell, Gregory F.
author_sort	Berger, Allen N.
title	The Ability of Banks to Lend to Informationally Opaque Small Businesses
title_short	The Ability of Banks to Lend to Informationally Opaque Small Businesses
title_full	The Ability of Banks to Lend to Informationally Opaque Small Businesses
title_fullStr	The Ability of Banks to Lend to Informationally Opaque Small Businesses
title_full_unstemmed	The Ability of Banks to Lend to Informationally Opaque Small Businesses
title_sort	ability of banks to lend to informationally opaque small businesses
publisher	World Bank, Washington, DC
publishDate	2014
url	http://documents.worldbank.org/curated/en/2001/08/1561491/ability-banks-lend-informationally-opaque-small-businesses http://hdl.handle.net/10986/19567
_version_	1764440029971611648

The Ability of Banks to Lend to Informationally Opaque Small Businesses

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