Does Bank Technology Affect Small Business Lending Decisions?

Abstract

I examine the effect that technology has on soft-information lending and address issues within the banking literature on quantifying bank technology. I find that banks engage in less soft-information lending when back-office bank technology is more productive and that banks engage in less soft-information lending when they own interactive web technology. I find that competition, lending decisions, and bank size are the primary drivers of technological development. I show that these results are robust to econometric tests that account for endogeneity, to an alternative definition of the bank's size, and to the inclusion of lending portfolio controls.

Does digital financial inclusion matter for firms’ ESG disclosure? Evidence from China

“…First, the study enriches the literature on the effect of digital financial inclusion on corporate strategic decision-making from the perspective of firms' ESG disclosure. It can help us achieve a deeper understanding of how digital financial inclusion can influence corporate ESG behavior and information disclosure outcomes (Sedunov, 2017;Fuster et al, 2019;Goldstein et al, 2019;Thakor, 2020). Second, this study advances the investigation of the influence factors of firms' ESG disclosure from the external financial environment perspective (i.e., digital financial inclusion).…”

Hryckiewicz, Aneta; Korosteleva, Julia; Kozlowski, Lukasz; Rzepka, Malwina; Wang, Ruomeng; (2022) Bank financial innovation and SMEs lending: do we experience a transformation in a bank-SME relationship?

“…Therefore, we empirically verify whether the opaquest companies are more likely to access the credit at more digitalized banks. It could then indicate of potential replacement of "soft" information by the "hard" one as suggested by Sedunov (2017). Interestingly, our regression results cannot replicate the results generated on Fintech lending.…”

“…The information friction is especially a severe problem for the opaquest firms. The lack of reliable information on these firms, lack of collateral, reduced market scrutiny, and high agency problem have caused these businesses have been the most neglected by financial intermediaries (Athreya et al, 2012;Sedunov, 2017;Sanchez, 2018). Thus, higher availability and accuracy of the information, increased number of information channels, and information sharing should especially benefit such companies.…”

Demand for credit in high-density markets in Kampala: Application of digital lending and implication for product innovation

“…Theories of transaction costs economics (TCE) advanced by Coase (1937Coase ( , 1998 and Williamson (1989Williamson ( ,2008 are applicable to explain credit market imperfections (Matsuoka & Shibata, 2012), choice of rating technology and loan pricing (De Silva, Dockner, Jankowitsch, Pichler & Ritzberger, 2014;Matsuoka & Shibata, 2012), information acquisition (Banerjee, 2005), information sharing in credit markets (Pagano & Jappelii, 1993) and the relevance of technology in breaking information barriers in digital credit (Beck, Ioannidou & Schäfer, 2018;Sedunov, 2017). Transaction cost is the variance in the cost of conducting transactions for resources in a marketplace.…”

“…Risks such as over-indebtedness (Kozuka, & Nottage, 2009) and bankruptcy (Sanchez, 2018); inability to meet household needs for food (Izaguirre, et al, 2018) calls for a need to protect consumers (Mazer & Fiorillo, 2015;Izaguirre, et al, 2018) of digital credit. Financial technology is relevant to address concerns related to behaviours of consumers of credit products and services (Kozuka, & Nottage, 2009;LexisNexis, 2019;Hertzberg, Liberman & Paravisini, 2015;Livshits, 2015;Carlsson, Larsson, Svensson, & Åström, 2017) as well as concerns related to transaction economics (Coase, 1937(Coase, , 1998Williamson, 1989;Matsuoka & Shibata, 2012;De Silva, Dockner, Jankowitsch, Pichler & Ritzberger, 2014;Banerjee, 2005;Pagano & Jappelii, 1993;Beck, Ioannidou & Schäfer, 2018;Sedunov, 2017). Nonetheless, human "touch" in digital lending practices tends to reduce defaults .…”