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  • Journal of Financial and Quantitative Analysis, Volume 39, Issue 2
  • June 2004, pp. 227-251

Cookie Cutter vs. Character: The Micro Structure of Small Business Lending by Large and Small Banks

  • Rebel A. Cole (a1), Lawrence G. Goldberg (a2) and Lawrence J. White (a3)
  • DOI:
  • Published online: 01 April 2009

The informational opacity of small businesses makes them an interesting area for the study of banks' lending practices and procedures. We use data from a survey of small businesses to analyze the micro level differences in the loan approval processes of large and small banks. We provide evidence that large banks ($1 billion or more in assets) employ standard criteria obtained from financial statements in the loan decision process, whereas small banks rely to a greater extent on information about the character of the borrower. These cookie-cutter and character approaches are compatible with the incentives and environments facing large and small banks.

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Journal of Financial and Quantitative Analysis
  • ISSN: 0022-1090
  • EISSN: 1756-6916
  • URL: /core/journals/journal-of-financial-and-quantitative-analysis
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