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How do banks assess entrepreneurial competence? The role of voluntary information disclosure
journal contribution
posted on 2023-08-30, 13:45 authored by Andrea Moro, Matthias Fink, Teemu KautonenThis research adds to the literature on relationship lending in the small business context by discussing the roles of entrepreneurial competence and voluntarily disclosed information as determinants of credit access. More specifically, we propose that the loan manager’s evaluation of the information voluntarily disclosed by the entrepreneur is an important complement to publicly available financial data and soft information collected through observation and third parties in framing the loan manager’s perception of the entrepreneur’s competence. Further, we argue that banks charge lower interest rates if the loan manager perceives the entrepreneur to be competent. Econometric analysis based on 433 bank-firm relationships supports these hypothesised relationships. The results imply that entrepreneurs need to communicate their competence effectively to loan managers, and that banks should utilise their loan managers’ personal evaluations as inputs to lending decisions.
History
Refereed
- Yes
Volume
32Issue number
5Page range
525-544Publication title
International Small Business JournalISSN
1741-2870External DOI
Publisher
SAGEFile version
- Accepted version
Language
- eng
Official URL
Legacy posted date
2013-05-28Legacy creation date
2018-12-07Legacy Faculty/School/Department
ARCHIVED Lord Ashcroft International Business School (until September 2018)Usage metrics
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