Commercial lending concentration and bank expertise: Evidence from borrower financial statements
Author(s)Berger, Philip G.; Minnis, Michael; Sutherland, Andrew Gordon
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Lending concentration features prominently in models of information acquisition by banks, but empirical evidence on its role is limited. Using bank-level loan exposures, we find banks are less likely to collect audited financial statements from firms in industries and regions in which they have more exposure. These findings are stronger in settings in which adverse selection is acute and muted when the bank lacks experience with an exposure. Our results offer novel evidence on how bank characteristics are related to the type of financial information they use and support theoretical predictions suggesting portfolio concentration reveals a bank's relative expertise.
DepartmentSloan School of Management
Journal of Accounting and Economics
Berger, Philip G. et al. "Commercial lending concentration and bank expertise: Evidence from borrower financial statements." Journal of Accounting and Economics 64, 2-3 (November 2017): 253-277 © 2017 Elsevier B.V.