Template-type: ReDif-Paper 1.0
Author-Name: Dinh, T.H.T.
Author-workplace-name: Finance
Author-Name: Kleimeier, S.
Author-workplace-name: Finance
Author-Name: Straetmans, S.T.M.
Author-workplace-name: Finance
Title: Bank lending strategy, credit scoring and financial crises
Abstract: Adverse selection inherent in the bank-borrower relationship typically intensifies during crises. This problem is expecially severe in emerging markets, characterized by weak institutions and banks with poorly developed monitoring and screening abilities. Exploiting a unique sample of Vietnamese loans, we show that by updating their credit scoring models banks can significantly improve their screening abilities. Our results suggest that a crisis fundamentally changes default patterns and that a model based on post-crisis data outperforms models based on pre-crisis data. We conclude that updating credit scoring models is a viable alternative to credit rationing for banks and, in combination with relationship lending, can lead to improved loan pricing, efficiency and profitability.
Series: GSBE Research Memoranda
Creation-Date: 20130101
Number: 053
File-URL: https://cris.maastrichtuniversity.nl/ws/files/831890/guid-b45fd967-d4b1-4cab-8798-968d0430123f-ASSET1.0.pdf
File-Format: application/pdf
File-Size: 5387713
Handle: Repec:unm:umagsb:2013053
DOI: 10.26481/umagsb.2013053