Social Proximity, Information, and Incentives in Local Bank Lending
Research output: Journal Publications and Reviews › RGC 21 - Publication in refereed journal › peer-review
Author(s)
Related Research Unit(s)
Detail(s)
| Original language | English |
|---|---|
| Pages (from-to) | 80–146 |
| Journal / Publication | The Review of Corporate Finance Studies |
| Volume | 13 |
| Issue number | 1 |
| Online published | 18 Jun 2021 |
| Publication status | Published - Feb 2024 |
Link(s)
Abstract
Exploring the role of social proximity in bank lending using a proprietary data set, we uncover evidence of a significant social proximity effect on private information acquisition. Local loan officers have better information to identify higher-quality borrowers through improved screening. This advantage is greater when firms have higher information asymmetry and lower ratings. Results suggest that sociocultural resources drive locals' informational advantages and improve their lending performance. Importantly, we find that the social proximity advantage interacts with loan officer incentives. Strong evidence suggests that loan officers can be incentivized to use their social proximity advantage to make better loans. © The Author(s) 2021. Published by Oxford University Press on behalf of The Society for Financial Studies.
Research Area(s)
- CULTURAL PROXIMITY, PROPENSITY SCORE, CREDIT, DISTANCE, GEOGRAPHY, MATTER, PERFORMANCE, CONSTRAINTS, COMPETITION, TIES
Citation Format(s)
Social Proximity, Information, and Incentives in Local Bank Lending. / Wang, Junbo; Wang, Yun; Wu, Chunchi et al.
In: The Review of Corporate Finance Studies, Vol. 13, No. 1, 02.2024, p. 80–146.
In: The Review of Corporate Finance Studies, Vol. 13, No. 1, 02.2024, p. 80–146.
Research output: Journal Publications and Reviews › RGC 21 - Publication in refereed journal › peer-review
