Paper #1809

Title:

Borrower versus bank channels in lending: Experimental- and administrative-based evidence

Authors:

Valentina Michelangeli, José-Luis Peydró and Enrico Sette

Date:

December 2021

Abstract:

We identify the relative importance for bank lending of borrower (demand-side) versus bank (supply-side) factors. We submit thousands of fictitious mortgage applications, changing one borrower-level factor at time, to the major Italian online mortgage platform. Each application goes to all banks. Borrower and bank factors are equally strong in causing and explaining loan acceptance. For pricing, borrower factors are instead stronger. Moreover, banks supplying less credit accept riskier borrowers. Exploiting the administrative credit register, there is borrower-lender assortative matching, and the bank-level strength measure estimated on the experimental data is associated to credit supply and risk-taking to real firms.

Keywords:

credit; banks; mortgages; SMEs; risk-taking.

JEL codes:

G21; G51; E51.

Area of Research:

Finance and Accounting

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