How Do Japanese Banks Discipline Small- and Medium-Sized Borrowers? An Investigation of The Deployment of Lending Technologies
Kobe University - Graduate School of Business Administration
Gregory F. Udell
Indiana University Bloomington - Department of Finance
Nagoya University - Department of Economics
November 30, 2008
International Finance Review, Vol. 9, pp. 57-80, 2008
This paper empirically investigates how banks evaluate the creditworthiness of small- and medium-sized enterprises (SMEs). Following SME loan underwriting literature that distinguishes among different lending technologies, we test whether the typical SME bank loan is underwritten primarily based on just a single technology. We find that although financial statement lending is the most commonly used and serves as a kind of basic technology, it tends not to be used to the exclusion of other technologies. These findings imply that, at least in Japan, SME lending practice may be inconsistent with academic research on how banks underwrite loans elsewhere.
Accepted Paper Series
Date posted: December 27, 2010
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