How Do Japanese Banks Discipline Small- and Medium-Sized Borrowers? An Investigation of The Deployment of Lending Technologies

International Finance Review, Vol. 9, pp. 57-80, 2008

Posted: 27 Dec 2010

See all articles by Hirofumi Uchida

Hirofumi Uchida

Kobe University - Graduate School of Business Administration

Gregory F. Udell

Indiana University - Kelley School of Business - Department of Finance

Nobuyoshi Yamori

Kobe University - Research Institute for Economics & Business Administration

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Date Written: November 30, 2008

Abstract

This paper empirically investigates how banks evaluate the creditworthiness of small- and medium-sized enterprises (SMEs). Following SME loan underwriting literature that distinguishes among different lending technologies, we test whether the typical SME bank loan is underwritten primarily based on just a single technology. We find that although financial statement lending is the most commonly used and serves as a kind of basic technology, it tends not to be used to the exclusion of other technologies. These findings imply that, at least in Japan, SME lending practice may be inconsistent with academic research on how banks underwrite loans elsewhere.

Suggested Citation

Uchida, Hirofumi and Udell, Gregory F. and Yamori, Nobuyoshi, How Do Japanese Banks Discipline Small- and Medium-Sized Borrowers? An Investigation of The Deployment of Lending Technologies (November 30, 2008). International Finance Review, Vol. 9, pp. 57-80, 2008, Available at SSRN: https://ssrn.com/abstract=1731399

Hirofumi Uchida (Contact Author)

Kobe University - Graduate School of Business Administration ( email )

2-1, Rokkodai-cho, Nada-ku
Kobe, 657-8501
Japan
81-78-803-6949 (Phone)

HOME PAGE: http://www.b.kobe-u.ac.jp/~uchida

Gregory F. Udell

Indiana University - Kelley School of Business - Department of Finance ( email )

1309 E. 10th St.
Bloomington, IN 47405
United States

Nobuyoshi Yamori

Kobe University - Research Institute for Economics & Business Administration ( email )

2-1, Rokkodai cho
Nada-ku
Kobe, 657-8501
Japan

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