@article{da40921475d64303a65f2c4ad14473a9,
title = "Does function follow organizational form? Evidence from the lending practices of large and small banks",
abstract = "Theories based on incomplete contracting suggest that small organizations have a comparative advantage in activities that make extensive use of {"}soft{"} information. We provide evidence consistent with small banks being better able to collect and act on soft information than large banks. In particular, large banks are less willing to lend to informationally {"}difficult{"} credits, such as firms with no financial records. Moreover, after controlling for the endogeneity of bank-firm matching, we find that 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.",
keywords = "Banking, Organizations, Soft information",
author = "Berger, {Allen N.} and Miller, {Nathan H.} and Petersen, {Mitchell A.} and Rajan, {Raghuram G.} and Stein, {Jeremy C.}",
note = "Funding Information: The opinions in this paper do not necessarily reflect those of the Federal Reserve Board or its staff. This work has been supported by the National Science Foundation (Rajan, Stein), and the George J. Stigler Center for Study of the State and Economy (Rajan). We are grateful to Phil Ostromogolsky for outstanding research assistance. Thanks also to seminar participants at Yale, the Federal Reserve Banks of New York and Atlanta, Tulane, Babson, Dartmouth, Washington University, the University of Illinois, the Federal Reserve Bank of Chicago Bank Structure Conference, the NBER, and the Western Finance Association meetings, as well as to Abhijit Banerjee, Michael Kremer, David Scharfstein, Andrei Shleifer, David Smith, Greg Udell, Christopher Udry, James Weston, Michael Whinston, and the referees for helpful comments and suggestions. ",
year = "2005",
month = may,
day = "1",
doi = "10.1016/j.jfineco.2004.06.003",
language = "English (US)",
volume = "76",
pages = "237--269",
journal = "Journal of Financial Economics",
issn = "0304-405X",
publisher = "Elsevier",
number = "2",
}