The Industry Expertise Channel of Mortgage Lending

55 Pages Posted: 14 Apr 2021 Last revised: 3 Sep 2021

See all articles by Zhanbing Xiao

Zhanbing Xiao

The University of British Columbia

Yuxiang Zheng

University of British Columbia, Sauder School of Business

Date Written: March 1, 2021

Abstract

This paper documents an industry expertise channel that reduces the information asymmetry between banks and mortgage borrowers. This channel is a result of information spillover from a bank’s specialization in corporate lending to its mortgage lending. We find that banks indeed rely on the channel in mortgage lending, especially when information asymmetry or borrower risk is high. Further tests show that mortgages originated through the channel contain more soft information and have better performance. The findings suggest that information from the channel improves banks’ screening and monitoring efficiency in the mortgage market.

Keywords: Information Asymmetry, Industry Expertise, Syndicated Loans, Mortgages

JEL Classification: G21, G30, D82.

Suggested Citation

Xiao, Zhanbing and Zheng, Yuxiang, The Industry Expertise Channel of Mortgage Lending (March 1, 2021). Available at SSRN: https://ssrn.com/abstract=3792629 or http://dx.doi.org/10.2139/ssrn.3792629

Zhanbing Xiao (Contact Author)

The University of British Columbia ( email )

Vancouver, British Columbia
Canada

HOME PAGE: http://www.zhanbingxiao.com

Yuxiang Zheng

University of British Columbia, Sauder School of Business ( email )

Vancouver
Canada

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