Year: 2024
Type: article
Study design: Observational Study
Abstract: First‐time minority borrowers often receive less desirable outcomes than first‐time White borrowers. Relationship lenders, who use both hard information and soft (community) information about new borrowers, can gain insights into a borrower's creditworthiness even without an existing bank–borrower relationship and provide more loan opportunities for new minority borrowers than transactional lenders. Our results show that borrowing from a relationship lender reduces lending outcome discrepancies between new minority borrowers and new White borrowers, not only in loan acceptance rates but also in borrower perceptions. These results suggest that borrowers' soft information is an important part of relationship lenders' decision‐making process.
DOI: 10.1111/jfir.12435
Authors: Arthur M. Tran, Drew B. Winters
Institutions: Southeastern Oklahoma State University, Texas Tech University
Language: English
Subfield: Finance
Domain: Social Sciences
SDG: Reduced inequalities
Open Access status: bronze
OpenAlex ID: W4402053758