A bank’s success hinges on figuring out whom to lend to and at what rate. While transaction banks make this judgment using hard numbers, relationship banks get to know their clients and their businesses, and accept soft data that could conceal either “hidden gems” or “dirty little secrets.” Reint Gropp, Christian Gruendl and Andre Guettler examine which strategy pays off. getAbstract recommends their fresh analysis to borrowers seeking the best terms, bank executives wishing to optimize lending, and regulators and politicians concerned with small business growth.
In this summary, you will learn
- How banks employ “soft information,”
- Why competitive markets result in a greater degree of specialization among banks, and
- How borrowers choose between relationship banks and transaction banks.
About the Authors
Reint Gropp holds the chair of sustainable banking and finance at Goethe University in Frankfurt. Christian Gruendl and Andre Guettler work at the finance department at the European Business School.
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