The informational role of ownership networks in bank lending
This paper documents novel large-sample evidence on the informational role of interfirm ownership networks in bank lending. Using comprehensive loan-level data in China, we find that banks internal loan ratings at issuance predict subsequent delinquent events more accurately when borrowers are conne...
| Main Authors: | , , |
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| Other Authors: | |
| Format: | Journal Article |
| Language: | English |
| Published: |
2022
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| Subjects: | |
| Online Access: | https://hdl.handle.net/10356/163941 |
| _version_ | 1826115442200018944 |
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| author | Gao, Haoyu Ru, Hong Yang, Xiaoguang |
| author2 | Nanyang Business School |
| author_facet | Nanyang Business School Gao, Haoyu Ru, Hong Yang, Xiaoguang |
| author_sort | Gao, Haoyu |
| collection | NTU |
| description | This paper documents novel large-sample evidence on the informational role of interfirm ownership networks in bank lending. Using comprehensive loan-level data in China, we find that banks internal loan ratings at issuance predict subsequent delinquent events more accurately when borrowers are connected to banks existing customers via ownership networks. In post-issuance monitoring for delinquent loans, banks with access to ownership networks manage to downgrade their initial ratings before late payments. These findings suggest that ownership networks facilitate the transmission of private information for bank lending. Moreover, ownership networks are more important for transmitting information related to small and medium enterprises. |
| first_indexed | 2024-10-01T03:55:32Z |
| format | Journal Article |
| id | ntu-10356/163941 |
| institution | Nanyang Technological University |
| language | English |
| last_indexed | 2024-10-01T03:55:32Z |
| publishDate | 2022 |
| record_format | dspace |
| spelling | ntu-10356/1639412023-05-19T07:31:18Z The informational role of ownership networks in bank lending Gao, Haoyu Ru, Hong Yang, Xiaoguang Nanyang Business School Business::Finance Financial Intermediation Private Information This paper documents novel large-sample evidence on the informational role of interfirm ownership networks in bank lending. Using comprehensive loan-level data in China, we find that banks internal loan ratings at issuance predict subsequent delinquent events more accurately when borrowers are connected to banks existing customers via ownership networks. In post-issuance monitoring for delinquent loans, banks with access to ownership networks manage to downgrade their initial ratings before late payments. These findings suggest that ownership networks facilitate the transmission of private information for bank lending. Moreover, ownership networks are more important for transmitting information related to small and medium enterprises. Ministry of Education (MOE) Ru acknowledges the financial support from Ministry of Education, Singapore, under its Tier 1 RG134/20. Gao acknowledges the financial support from the National Natural Science Foundation of China (No. 71702207). Yang acknowledges the financial support from the National Natural Science Foundation of China (Nos. 71850008 and 71532013). 2022-12-22T08:22:21Z 2022-12-22T08:22:21Z 2022 Journal Article Gao, H., Ru, H. & Yang, X. (2022). The informational role of ownership networks in bank lending. Journal of Financial and Quantitative Analysis, 57(8), 2993-3017. https://dx.doi.org/10.1017/S0022109021000788 0022-1090 https://hdl.handle.net/10356/163941 10.1017/S0022109021000788 2-s2.0-85124183937 8 57 2993 3017 en RG134/20 Journal of Financial and Quantitative Analysis © 2022 The Author(s). Published by Cambridge University Press on behalf of The Michael G. Foster School of Business, University of Washington. All rights reserved. |
| spellingShingle | Business::Finance Financial Intermediation Private Information Gao, Haoyu Ru, Hong Yang, Xiaoguang The informational role of ownership networks in bank lending |
| title | The informational role of ownership networks in bank lending |
| title_full | The informational role of ownership networks in bank lending |
| title_fullStr | The informational role of ownership networks in bank lending |
| title_full_unstemmed | The informational role of ownership networks in bank lending |
| title_short | The informational role of ownership networks in bank lending |
| title_sort | informational role of ownership networks in bank lending |
| topic | Business::Finance Financial Intermediation Private Information |
| url | https://hdl.handle.net/10356/163941 |
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