Screening and loan origination time: lending standards, loan defaults and bank failures

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  • dc.contributor.author Bedayo, Mikel
  • dc.contributor.author Jiménez, Gabriel
  • dc.contributor.author Peydró, José-Luis
  • dc.contributor.author Vegas, Raquel
  • dc.contributor.other Universitat Pompeu Fabra. Departament d'Economia i Empresa
  • dc.date.accessioned 2024-11-14T10:09:41Z
  • dc.date.available 2024-11-14T10:09:41Z
  • dc.date.issued 2020-10-01
  • dc.date.modified 2024-11-14T10:07:20Z
  • dc.description.abstract We show that loan origination time is crucial for bank lending standards over the credit cycle, as well as for ex-post loan-level defaults and bank-level failures. We use the credit register in Spain for the business loans over the 2002-15 period focusing on the time of a loan application and its granting. When VIX is low (proxying for good times) banks shorten the time to originate a loan, particularly to less-capitalized (riskier) firms. Bank moral hazard incentives are a key mechanism. Shorter loan origination time to ex-ante riskier firms in good times is especially stronger for: (i) banks with less capital (proxying for moral hazard problems between bank owners and taxpayers/debtholders); (ii) non-listed banks (proxying for moral hazard problems between bank management and shareholders); (iii) loans to firms in geographical areas which do not form the bank's main market and experience a real estate bubble (proxying for moral hazard problems between local loan officers and the bank headquarter), mainly if those areas have more bank competition; or, relatedly, stronger effects on loans granted to firms operating in industries which the bank is not most specialized at, proxying for moral hazard problems between different parts within the bank. Moreover, shorter origination time is associated with higher ex-post defaults at the loan-level, and aggregated at the bank-level, with higher likelihood of bank failure or other strong bank distress events, overall consistent with lower screening (time).
  • dc.format.mimetype application/pdf*
  • dc.identifier https://econ-papers.upf.edu/ca/paper.php?id=1749
  • dc.identifier.citation
  • dc.identifier.uri http://hdl.handle.net/10230/68581
  • dc.language.iso eng
  • dc.relation.ispartofseries Economics and Business Working Papers Series; 1749
  • dc.rights L'accés als continguts d'aquest document queda condicionat a l'acceptació de les condicions d'ús establertes per la següent llicència Creative Commons
  • dc.rights.accessRights info:eu-repo/semantics/openAccess
  • dc.rights.uri http://creativecommons.org/licenses/by-nc-nd/3.0/es/
  • dc.subject.keyword loan origination time; lending standards; credit cycles; defaults; bank failures; screening
  • dc.subject.keyword Finance and Accounting
  • dc.title Screening and loan origination time: lending standards, loan defaults and bank failures
  • dc.title.alternative
  • dc.type info:eu-repo/semantics/workingPaper