Römer, Ulf Weber, Ron Mußhoff, Oliver Turvey, Calcum G.
Year of Publication:
Diskussionspapiere, Department für Agrarökonomie und Rurale Entwicklung 1702
The prevention of asymmetric information plays a major role in successful small business lending. The purpose of this research is to determine if small business applicants report their income information correctly when requesting a loan. Therefore, a randomized controlled trial bogus pipeline experiment was set up during a typical cash-flow analysis of a bank for small businesses in the Philippines. Results indicate that loan applicants of the treatment group reported a lower income, an effect which is most pronounced in the lowest income percentile. Moreover, our analyses reveal higher loan delinquencies in the control group.
Small business finance Income reporting Asymmetric information Bogus pipeline Randomized controlled trial