Loan officers and relationship lending to SMEs

Previous research suggests that loan officers may play a critical role in relationship lending by producing soft information about SMEs. For the first time, we analyze this hypothesis and find empirical evidence that indicates that loan officer activities are associated with bank production of soft information. We also find that loan officers at small banks produce more soft information than at large banks, but large banks appear to have the equivalent potential to underwrite relationship loans. Nevertheless, large banks choose instead to focus their resources on transactions lending.