Cookie-Cutter Versus Character: The Micro Structure of Small-Business Lending by Large and Small Banks

43 Pages Posted: 2 May 2004 Last revised: 10 Apr 2010

See all articles by Rebel A. Cole

Rebel A. Cole

Florida Atlantic University

Lawrence G. Goldberg

University of Miami - Department of Finance

Lawrence J. White

New York University (NYU) - Leonard N. Stern School of Business, Department of Economics

Multiple version iconThere are 3 versions of this paper

Date Written: June 11, 2003

Abstract

The informational opacity of small businesses makes them an interesting area for the study of banks' lending practices and procedures. We use data from a survey of small businesses to analyze the micro-level differences in the loan-approval processes of large and small banks. We provide evidence that large banks ($1 billion or more in assets) employ standard criteria obtained from financial statements in the loan decision process, whereas smaller banks rely to a larger extent on information about the character of the borrower. These cookie-cutter and character approaches are compatible with the incentives and environments facing large and small banks.

Keywords: Bank, bank size, credit availability, relationship lending, small business

JEL Classification: G21, G32

Suggested Citation

Cole, Rebel A. and Goldberg, Lawrence G. and White, Lawrence J., Cookie-Cutter Versus Character: The Micro Structure of Small-Business Lending by Large and Small Banks (June 11, 2003). Journal of Financial and Quantitative Analysis, Vol. 39, No. 2, June 2004. Available at SSRN: https://ssrn.com/abstract=536302

Rebel A. Cole (Contact Author)

Florida Atlantic University ( email )

College of Business
777 Glades Road
Boca Raton, FL 33431
United States
1-561-297-4969 (Phone)

HOME PAGE: http://rebelcole.com

Lawrence G. Goldberg

University of Miami - Department of Finance

P.O. Box 248094
Coral Gables, FL 33124-6552
United States

Lawrence J. White

New York University (NYU) - Leonard N. Stern School of Business, Department of Economics ( email )

44 West 4th Street
Suite 9-160
New York, NY NY 10012
United States

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