Abstract

http://ssrn.com/abstract=926981
 
 

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Loan Officers and Relationship Lending


Hirofumi Uchida


Kobe University - Graduate School of Business Administration

Nobuyoshi Yamori


Kobe University - Research Institute for Economics & Business Administration

Gregory F. Udell


Indiana University - Kelley School of Business - Department of Finance

March 2006

RIETI Discussion Paper No. 06-E-029

Abstract:     
Current theoretical and empirical research suggests that small banks have a comparative advantage in processing soft information and delivering relationship lending. The most comprehensive analysis of this view found using U.S. data that smaller SMEs borrow from smaller banks and smaller banks have stronger relationships with their borrowers (Berger, Miller, Petersen, Rajan, and Stein 2005) (BMPRS). We employ essentially the same methodology as BMPRS on a unique Japanese data set but our findings are different in interesting ways. Like BMPRS we find that more opaque firms are more likely to borrow from small banks. Unlike BMPRS, however, our methodology allows us to attribute this to the ability of large banks to deliver financial statement lending. Finally, quite unlike BMPRS we do not, on balance, find that small banks have stronger relationships with their SMEs. We offer some speculation on potential explanations for these differences. One possibility is that the credit culture and deployment of SME lending technologies differ in Japan from the U.S. However, we note that strong conclusions cannot be reached without more research.

Number of Pages in PDF File: 39

Keywords: Banks, Small and Medium Enterprises, Relationship, Japan, Soft information

JEL Classification: G21, L22, G32, D82, D83

working papers series


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Date posted: August 30, 2006  

Suggested Citation

Uchida, Hirofumi and Yamori, Nobuyoshi and Udell, Gregory F., Loan Officers and Relationship Lending (March 2006). RIETI Discussion Paper No. 06-E-029. Available at SSRN: http://ssrn.com/abstract=926981 or http://dx.doi.org/10.2139/ssrn.926981

Contact Information

Hirofumi Uchida (Contact Author)
Kobe University - Graduate School of Business Administration ( email )
2-1, Rokkodai-cho, Nada-ku
Kobe, 657-8501
Japan
81-78-803-6949 (Phone)
HOME PAGE: http://www.b.kobe-u.ac.jp/~uchida
Nobuyoshi Yamori
Kobe University - Research Institute for Economics & Business Administration ( email )
2-1, Rokkodai cho
Nada-ku
Kobe, 657-8501
Japan
Gregory F. Udell
Indiana University - Kelley School of Business - Department of Finance ( email )
1309 E. 10th St.
Bloomington, IN 47405
United States

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