Economics, Econometrics and Finance
4 years ago

Profit-driven lenders restrict credit, impacting businesses regardless of risk.

Econometric Reviews
Credit rationing by loan size in commercial loan markets
Stacey L. Schreft, Anne P. Villamil

Paper Summary

Credit rationing in commercial loan markets can happen based on loan size, even if borrowers have similar default risk. A model shows lenders may limit credit size to maximize profit, leading to an interest rate pattern seen in U.S. loan markets.

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