Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/70500 
Year of Publication: 
2008
Series/Report no.: 
Working Paper No. 2008-10
Publisher: 
Federal Reserve Bank of Chicago, Chicago, IL
Abstract: 
Using a unique sample of comparable online and in-person loan transactions, we study the determinants of arm's-length and inside lending focusing on the differential information content across debt types. We find that soft private information primarily underlies relationship lending whereas hard public information drives arm's-length debt. The bank's relative reliance on public or private information in lending decisions then determines trade-offs between the availability and pricing of credit across loan types. Consistent with economic theory, relationship debt leads to informational capture and higher interest rates but is more readily available whereas the opposite holds true for transactional debt. In their choice of loan type, lender switching, and default behavior firms, however, anticipate the inside bank's strategic use of information and act accordingly.
JEL: 
G21
L11
L14
D44
Document Type: 
Working Paper

Files in This Item:
File
Size
332.75 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.