Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
7356701 | Journal of Banking & Finance | 2018 | 54 Pages |
Abstract
This paper empirically examines the role of soft information in the competitive interaction between relationship and transaction banks. Soft information can be interpreted as a valuable signal about the quality of a firm that is observable to a relationship bank, but not to a transaction bank. We show that borrowers self-select to relationship banks depending on whether their observed soft information is positive or negative. Competition affects the investment in learning the soft information from firms by relationship banks and transaction banks asymmetrically. Relationship banks invest more; transaction banks invest less in soft information, exacerbating the selection effect.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Reint Gropp, Andre Guettler,