Credit and information in universal banking : a clinical study

We studied information and interaction processes in six lending relationships between a universal bank and medium sized firms. The study is based on the credit files of the respective firms. If no problems occur in these
We studied information and interaction processes in six lending relationships between a universal bank and medium sized firms. The study is based on the credit files of the respective firms. If no problems occur in these lending relationships, bank monitoring is based mainly on cheap, retrospective and internal data. In case of distress, more expensive, prospective and external information is used. The level of monitoring and the willingness to renegotiate the lending relationship depends on what the lending officers can learn about the future prospects of the firm from the behaviour of the debtors. We identify both signalling and bonding activities. Such learning from past behaviour seems to allow monitoring at low cost, whereas the direct observation of the firm's investment outlook seems to be very costly. Also, too much knowledge about the firm's investments might leave the bank in a very strong bargaining position and distort investment incentives. Therefore, the traditional view of credit assessment as observation of the quality of a borrower's investment programme needs to be reconsidered.
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Metadaten
Author:Hans-Peter Burghof, Claudia Henschel
URN:urn:nbn:de:hebis:30-9510
Parent Title (German):Institut für Kapitalmarktforschung (Frankfurt am Main): CFS working paper series ; Nr. [19]98,13
Series (Serial Number):CFS working paper series (1998, 13)
Publisher:Inst. für Kapitalmarktforschung
Place of publication:Frankfurt am Main
Document Type:Working Paper
Language:English
Year of Completion:1998
Year of first Publication:1998
Publishing Institution:Univ.-Bibliothek Frankfurt am Main
Release Date:2005/06/13
Tag:banking ; distress; relationship lending ; renegotiation
SWD-Keyword:Klein- und Mittelbetrieb; Kredit; Universalbank
Pagenumber:21
First Page:1
Last Page:21
Source:CFS working paper ; 1998,13
HeBIS PPN:197104169
Institutes:Center for Financial Studies (CFS)
Dewey Decimal Classification:330 Wirtschaft
JEL-Classification:G21 Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
G32 Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure
G33 Bankruptcy; Liquidation
Sammlungen:Universitätspublikationen
Licence (German):License Logo Veröffentlichungsvertrag für Publikationen

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