Credit Ratings, Private Information, and Bank Monitoring Ability
37 Pages Posted: 21 Jun 2016
Date Written: 2016-06-16
In this paper, we use credit rating data from two large Swedish banks to elicit evidence on banks' loan monitoring ability. For these banks, our tests reveal that banks' internal credit ratings indeed include valuable private information from monitoring, as theory suggests. Banks' private information increases with the size of loans.
Keywords: Monitoring, Banks, Credit Bureau, Private Information, Public Information, Ratings, Regulation, Supervision, Overconfidence
JEL Classification: D82, G18, G21, G24, G32, G33
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