How do banks assess entrepreneurial competence? The role of voluntary information disclosure

Moro, Andrea, Fink, Matthias and Kautonen, Teemu (2014) How do banks assess entrepreneurial competence? The role of voluntary information disclosure. International Small Business Journal, 32 (5). pp. 525-544. ISSN 1741-2870

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Abstract

This 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.

Item Type:	Journal Article
Keywords:	bank lending relationship, competence, entrepreneurship, interest rate
Faculty:	ARCHIVED Lord Ashcroft International Business School (until September 2018)
Depositing User:	Repository Admin
Date Deposited:	28 May 2013 12:37
Last Modified:	10 Feb 2022 14:58
URI:	https://arro.anglia.ac.uk/id/eprint/292874

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