Bank loan quality deteriorates due to hierarchical decision-making, impacting small firms.
Bank loans got worse during the crisis, but it's not all the crisis's fault. A study looked at data from an Italian bank and found that how loans are approved affects their quality. Loans approved by higher-ups in the bank tend to be riskier. Older, bigger firms closer to the bank are less likely to have bad loans. Building relationships with the bank is more important than just doing transactions.