Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/330334 
Year of Publication: 
2025
Series/Report no.: 
BOFIT Discussion Papers No. 7/2025
Publisher: 
Bank of Finland, Bank of Finland Institute for Emerging Economies (BOFIT), Helsinki
Abstract: 
Banks are multidivisional organizations in which branches hold local knowledge about borrowers. Can this "soft" information be transmitted across units? Studying the population of corporate loans originated by a large commercial bank in China from 2010 to 2020, we find that when firms switch branches within bank, the switching loans carry a significantly lower spread than comparable nonswitching loans. After switching, the new branch further reduces the loan spreads initially, but ratchets it up afterwards, surprising evidence of intra-bank hold-up. By documenting how internal communication failures distort lending, we link relationship banking with delegation, coordination, and information transmission within organizations.
Subjects: 
organization structure
bank lending
hold-up
firm-bank relationship
JEL: 
G21
G32
L14
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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