A Multistage Model of Loans and the Role of Relationships

  title={A Multistage Model of Loans and the Role of Relationships},
  author={Sugato Chakravarty and Tansel Yilmazer},
The goal of this paper is to further our understanding of how relationships work in the borrower-lender interaction for a loan. A practical implication emerging from classical studies is that lenders overcome the problem of information asymmetry by collecting information about the borrowers through close relationships and using this information in credit approval and loan rate decisions. We test this implication in our paper using a robust sample selection methodology and data from the 1998… CONTINUE READING