Online Finance Research Seminar: ”Discouraged Borrowers & Heterogeneity in Lending Technology” by Paul-Olivier KLEIN , IAE
Speaker: Paul-Olivier KLEIN
IAE School of Management
Date and Location – Thursday October 15th 2020 from 12:30 to 14:30 on ZOOM
Discouragement of borrowers is a critical obstacle faced by firms when accessing to credit. We lift the hypothesis of homogenous lending technologies and show that firms that employ relationship or transactional lending are not discouraged in the same way. While relationship lending could have alleviated discouragement by tempering information asymmetries, we show that it actually exacerbates discouragement. We explain this effect by a self-rationing mechanism: firms better know their likelihood to get rejected when using relationship lending and decide not to apply in the first place. We confirm this view looking at the risk of the firm. We also show that opacity, measured as a mismatch in lending technology and the firm’s information asymmetries, and the existence of alternative sources of funding contribute to explain this result.
- CO-AUTHORS: Jérémie BERTRAND – IÉSEG Business School, Marieke DELANGHE – Edhec Business School, Paul-Olivier KLEIN – IAE School of Management, University of Lyon
- JEL CODES: G14 ; G21 ; D25 ; D45
- KEYWORDS: Borrower Discouragement; Lending Technology; Access to Credit; Relationship Lending.