Economics, Econometrics and Finance
4 years ago

Loan sales reshape lending relationships, impacting financial stability and trust.

1 view
Review of Financial Studies
On Loan Sales, Loan Contracting, and Lending Relationships
Steven Drucker, Manju Puri

Paper Summary

The article discusses how loan sales affect lending relationships and loan contracting. The researchers found that when banks sell loans, they tend to have weaker relationships with borrowers. This can lead to riskier loan terms and higher interest rates for borrowers. Loan sales can also impact the quality of loans and the overall stability of the financial system.

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