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Discussion Paper Discussion Paper 141 (2014.4)

[No.141] Differentiated Use of Small Business Credit Scoring by Relationship Lenders and Transactional Lenders: Evidence from Firm-Bank Matched Data in Japan

Arito Ono・Mizuho Research Institute
   
Ryo HASUMI
  Specially Appointed Fellow
Hideaki HIRATA
  Specially Appointed Fellow

2014/04/16

<Abstract>

This paper examines the ex-post performance of small and medium enterprises (SMEs) that obtained small business credit scoring (SBCS) loans, using a unique Japanese firm-bank matched dataset. The ex-post probability of default after the SBCS loan was provided significantly increased for SMEs that obtained an SBCS loan from a transactional lender. Also, the lending attitude of relationship lenders during the recent global financial crisis was more severe if a firm had received an SBCS loan from a transactional lender. These findings suggest that SBCS loans by transactional lenders are more prone to type II errors and detrimental to relationship lenders’ incentive to provide “liquidity insurance.”