Does Bank Technology Affect Small Business Lending Decisions?

Does Bank Technology Affect Small Business Lending Decisions?

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Article ID: iaor2017978
Volume: 40
Issue: 1
Start Page Number: 5
End Page Number: 32
Publication Date: Mar 2017
Journal: Journal of Financial Research
Authors:
Keywords: finance & banking, investment, decision
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.

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