The Diffusion of Financial Innovations: An Examination of the Adoption of Small Business Credit Scoring by Large Banking Organizations

Posted: 1 May 2006

See all articles by Jalal D. Akhavein

Jalal D. Akhavein

Fitch Ratings Inc.

W. Scott Frame

Federal Reserve Bank of Dallas

Lawrence J. White

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

Multiple version iconThere are 2 versions of this paper

Abstract

Financial innovation has been described as the life blood of efficient and responsive capital markets. Yet, few quantitative investigations have studied financial innovations and the diffusion of these new technologies. In this paper, we examine the diffusion of one such technology: credit scoring models for small business lending. Using data for large banking organizations, our hazard model indicates that banking firms with more branches innovate earlier, as do those located in the New York Federal Reserve district. Our Tobit model confirms these results and finds that organizations with fewer separately chartered banks but more branches innovate earlier.

Keywords: Credit scoring, small business lending, financial innovation, technology diffusion

JEL Classification: G2, O3, L2

Suggested Citation

Akhavein, Jalal D. and Frame, W. Scott and White, Lawrence J., The Diffusion of Financial Innovations: An Examination of the Adoption of Small Business Credit Scoring by Large Banking Organizations. Journal of Business, Vol 78, No. 2, March 2005 . Available at SSRN: https://ssrn.com/abstract=898872

Jalal D. Akhavein

Fitch Ratings Inc. ( email )

One State Street Plaza
New York, NY 10004
United States

W. Scott Frame

Federal Reserve Bank of Dallas ( email )

2200 N Pearl Street
Dallas, TX 75201
United States
214-922-6984 (Phone)

Lawrence J. White (Contact Author)

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

Register to save articles to
your library

Register

Paper statistics

Abstract Views
987
PlumX Metrics