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| Type | Master's Thesis |
| Scope | Discipline-based scholarship |
| Title | Has the Last-resort Small Business Lending been Screened Enough: Evidence from SBA Data |
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| Institution | University of Zurich |
| Faculty | Faculty of Business, Economics and Informatics |
| Number of Pages | 44 |
| Date | 2023 |
| Abstract Text | This paper examines the impact of the government’s partial guarantee loan provision (SBA 7(a) program) on small business lending during financial constraint periods. Our goal is to determine if access to loan securitization reduces banks’ incentives to screen borrowers, potentially leading to weakened screening standards. Our regression model and matching procedure support the idea that banks with high originate-to-distribute (OTD) ratios have sufficiently screened risky borrowers, which is supported by the evidence that high OTD banks have a wider loan pricing residual distribution. After looking into capital structure, we further confirm that banks are using SBA loans and the responsive secondary market to save regulatory capital, rather than diluting screening standards. This research provides insights into understanding government-guaranteed lending programs, the role of soft information in lending decisions, and the effects of loan sales on loan performance. Keywords: Originate-to-distribute, Small business lending, Financial crisis, Screening incentive, Government-guaranteed lending |
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