Research Interests

Corporate Finance, Financial Intermediation, Organizational Economics


Bank Response to Higher Capital Requirements: Evidence from a Quasi-Natural Experiment (with Reint Gropp, Steven Ongena, and Carlo Wix), forthcoming at the Review of Financial Studies.

Press: HLS

Working papers

Bargaining with a Bank

This paper examines bargaining as a mechanism to resolve information problems. To guide the analysis, I develop a parsimonious model of a credit negotiation between a bank and firms with varying impatience. In equilibrium, impatient firms accept the bank’s offer immediately, while patient firms wait and negotiate price adjustments. I test the empirical predictions using a hand-collected dataset on credit line negotiations. Firms signing the bank’s offer right away draw down their credit line after origination and default more than late signers. Late signers negotiate price adjustments more frequently, and, consistent with the model, these adjustments predict better ex post performance.

Strategic Use of Information and the Allocation of Authority

This paper investigates how agents use their information strategically to affect the allocation of decision-making authority. The empirical analysis uses a unique data set on credit applications of a large commercial bank. Loan officers could use multiple scoring trials to adjust the credit application and game the rules that determine the hierarchical distance between the loan officer and the loan approving officer. By exploiting rule changes which increased the hierarchical distance for a subset of the credit applications, the paper shows that loan officers use their information to alter the allocation of authority in the opposite direction of the imposed rule changes. In addition, the paper shows that loan officer have fewer incentives to game the rules after they lost the authority to approve high quality credit applications. The results show that (re)allocating authority in organizations may be difficult if information collecting agents could use their information strategically to affect the allocation of authority.

Is Loan Officer Discretion Adviced When Viewing Soft Information? (with Hans Degryse, Jose Liberti and Steven Ongena)

We show that the collection of soft information on the activities of small and medium sized enterprises and the exercising of loan officer discretion helps in monitoring these borrowers. We measure loan officer discretion as the deviations in granted loan amounts from the amounts stemming from the bank’s own credit scoring model. Soft information guides discretion, and helps in predicting loan default even when controlling for all available public and private information. Loan officers use soft information when deciding on the loan amount that is being granted: A one standard deviation of more favourable soft information results in the granting of a 16 percent higher loan amount. Beyond using soft information, loan officer discretion per se neither improves nor deteriorates loan outcomes.

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