Working Paper: CEPR ID: DP15276
Authors: Jos Luis Peydr; Enrico Sette; Valentina Michelangeli
Abstract: We identify the relative importance for lending of borrower (demand) versus bank (supply) factors.We submit thousands of fictitious mortgage applications, changing one borrower-level factor at time,to the major Italian online mortgage platform. Each application goes to all banks. We find thatborrower and bank factors are equally strong in causing and explaining loan acceptance. For pricing,borrower factors are instead stronger. Moreover, banks supplying less credit accept riskier borrowers.Exploiting the administrative credit register, we show borrower-lender assortative matching, and thatthe bank-level strength measure, estimated on the experimental data, determines credit supply andrisk-taking to real firms.
Keywords: credit; banks; mortgages; smes; risktaking
JEL Codes: G21; G51; E51
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| borrower factors (G51) | loan acceptance (G51) |
| bank factors (G21) | loan acceptance (G51) |
| borrower factors (G51) | loan pricing (G19) |
| bank factors (G21) | loan pricing (G19) |
| bank strength (G21) | risk-taking behavior in lending (G21) |
| bank-level strength measure (G21) | credit supply to real firms (E51) |