ITEM METADATA RECORD
Title: Rules versus discretion in loan pricing
Authors: Cerqueiro, G. ×
Degryse, Hans
Ongena, S. #
Issue Date: Oct-2011
Publisher: Academic Press
Series Title: Journal of Financial Intermediation vol:20 issue:4 pages:503-529
Abstract: Loan rates for seemingly identical borrowers often exhibit substantial dispersion. This paper investigates the determinants of the dispersion in interest rates on loans granted by banks to small and medium sized enterprises. We associate this dispersion with the loan officers’ use of “discretion” in the loan rate setting process. We find that “discretion” is most important if: (i) loans are small and unsecured; (ii) firms are small and opaque; (iii) the firm operates in a large and highly concentrated banking market; and (iv) the firm is distantly located from the lender. Consistent with the proliferation of information-technologies in the banking industry, we find a decreasing role for “discretion” over time in the provision of small credits to opaque firms. While widely used in the pricing of loans, “discretion” plays only a minor role in the decisions to grant loans.
ISSN: 1042-9573
Publication status: published
KU Leuven publication type: IT
Appears in Collections:Non-KU Leuven Association publications
× corresponding author
# (joint) last author

Files in This Item:
File Description Status SizeFormat
rulesversus.pdf Published 333KbAdobe PDFView/Open Request a copy

These files are only available to some KU Leuven Association staff members

 




All items in Lirias are protected by copyright, with all rights reserved.

© Web of science