Download This PaperThe Informational Role of Ownership Networks in Bank Lending
Journal of Financial and Quantitative Analysis, 57.8, 2993-3017
52 Pages Posted: 17 Jul 2018 Last revised: 13 Dec 2022
Date Written: December 16, 2022
Abstract
This paper documents novel large-sample evidence on the informational role of interfirm ownership networks in bank lending. Using comprehensive loan-level data in China, we find that banks’ internal loan ratings at issuance predict subsequent delinquent events more accurately when borrowers are connected to banks’ existing customers via ownership networks. In post-issuance monitoring for delinquent loans, banks with access to ownership networks manage to downgrade their initial ratings before late payments. These findings suggest that ownership networks facilitate the transmission of private information for bank lending. Moreover, ownership networks are more important for transmitting information related to small and medium enterprises.
Keywords: Network, Information, Bank Loan, Screening, Monitoring
JEL Classification: G21, G28, G32, L51
Suggested Citation: Suggested Citation
Hong Ru (Contact Author)
Nanyang Business School, Nanyang Technological University ( email )
Singapore, 639798
Singapore
(+65) 67904661 (Phone)
HOME PAGE: http://https://hongru.mit.edu/