Essays on banking

This dissertation studies how banks collect and process information. The first chapter studies how the organizational structure of banks affects the processing of information. The second chapter studies how banks use private information collected over the lending relationship in credit negotiations. The last chapter is joint work with Hans Degryse, Jose Liberti and Steven Ongena and studies how banks use ‘soft information’ to monitor small firms. This dissertation uses hand collected internal bank data which opens the black box on how banks communicate internally, negotiate and monitor small firms. The dissertation shows that a change in the organizational structure of a bank affects the incentives of loan officers to manipulate information and that the private information of a bank about small firms affects their bargaining power in credit negotiations and explains discretionary lending decisions of loan officers.