Do Relationships Matter? Evidence from Loan Officer Turnover

40 Pages Posted: 10 Sep 2012 Last revised: 14 Apr 2016

See all articles by Alejandro Drexler

Alejandro Drexler

Federal Reserve Bank of Chicago

Antoinette Schoar

Massachusetts Institute of Technology (MIT) - Sloan School of Management; National Bureau of Economic Research (NBER)

Date Written: December 2012

Abstract

Using exogenous shocks to the relationship between borrowers and loan-officers, we document that borrowers are less likely to receive new loans from the bank and are more likely to apply for credit from other banks when their original loan officers are absent. They also are more likely to miss payments or go into default. These effects are more pronounced when turnovers are unexpected as in the case of sickness leaves or when officers do not have strong incentives to transfer information, e.g. terminated loan officers. However, when given the right situation, e.g. voluntary resignations of loan officers, it seems possible to transfer soft information between employees within the same institution.

Keywords: Banks, loan officers, relationship lending, organisational structure

JEL Classification: G20, G21, G30

Suggested Citation

Drexler, Alejandro and Schoar, Antoinette, Do Relationships Matter? Evidence from Loan Officer Turnover (December 2012). Available at SSRN: https://ssrn.com/abstract=2144337 or http://dx.doi.org/10.2139/ssrn.2144337

Alejandro Drexler (Contact Author)

Federal Reserve Bank of Chicago ( email )

230 S La salle St, Chicago
Austin, IL 60604
United States

Antoinette Schoar

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

50 Memorial Drive, E52-447
Cambridge, MA 02142
United States
617-253-3763 (Phone)
617-258-6855 (Fax)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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