NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

NBER Working Papers by Allen N. Berger

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Working Papers

January 2002Does Function Follow Organizational Form? Evidence From the Lending Practices of Large and Small Banks
with Nathan H. Miller, Mitchell A. Petersen, Raghuram G. Rajan, Jeremy C. Stein: w8752
Theories based on incomplete contracting suggest that small organizations may do better than large organizations in activities that require the processing of soft information. We explore this idea in the context of bank lending to small firms, an activity that is typically thought of as relying heavily on soft information. We find that large banks are less willing than small banks to lend to informationally 'difficult' credits, such as firms that do not keep formal financial records. Moreover, controlling for the endogeneity of bank-firm matching, large banks lend at a greater distance, interact more impersonally with their borrowers, have shorter and less exclusive relationships, and do not alleviate credit constraints as effectively. All of this is consistent with small banks being bette...
May 2000Did U.S. Bank Supervisors Get Tougher During the Credit Crunch? Did They Get Easier During the Banking Boom? Did It Matter to Bank Lending?
with Margaret K. Kyle, Joseph M. Scalise: w7689
We test three hypotheses regarding changes in supervisory toughness' and their effects on bank lending. The data provide modest support for all three hypotheses that there was an increase in toughness during the credit crunch period (1989-1992), that there was a decline in toughness during the boom period (1993-1998), and that changes in toughness, if they occurred, affected bank lending. However, all of the measured effects are small, with 1% or less of loans receiving harsher or easier classification, about 3% of banks receiving better or worse CAMEL ratings, and bank lending being changed by 1% or less of assets.

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