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PreprintCited by 0Banking stability, regulation, efficiencyFinancial Distress and Bankruptcy PredictionCorporate Finance and Governance

Can soft information survive organizational distance? Evidence from SMB lending

Open access
Cerchiello, Paola, Filomeni, Stefano, Tanda, Alessandra·2025·European Accounting Review
DOI 10.2139/ssrn.5065824
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Abstract

This paper examines whether and how soft information in corporate loan applications influences the lending decision process, and whether organizational frictions moderate this influence. In this context, soft information refers to the text data collected, analyzed, and transmitted by loan officers to the bank's headquarters. Using a proprietary dataset from a large European bank, the study finds that soft information impacts both the outcomes and the speed of lending decisions. However, this effect is moderated by the organizational distance between the loan officer and the bank's headquarters. Additionally, we provide evidence that soft information embedded in comments serves as a strong predictor of company defaults, supporting its use in lending to small and medium-sized businesses (SMBs), particularly when branches are distant from the bank's headquarters. Our findings remain robust across additional analyses and tests, consistent with the presence of communication frictions within banking organizations that hinder the effective "hardening" of soft information as organizational distance increases.

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Authors
Cerchiello, P., Filomeni, S., & Tanda, A.
Affiliations
  • University of Pavia (IT)
  • University of Essex (GB)
Corresponding author
Tanda, Alessandra
ORCID
Venue
European Accounting Review
Publisher
Elsevier BV
Published
2025
Volume
34
Issue
5
Pages
2033-2054
ISSN
0963-8180 (ISSN-L)
DOI
10.2139/ssrn.5065824
OpenAlex
W4406394539
Cited by
0
References
55
FWCI
0.00
Type
journal article
Language
en
Open access
Locations
  • European Accounting Review (publishedVersion)
  • SSRN Electronic Journal (acceptedVersion)
  • Open Access at Essex (University of Essex) (acceptedVersion)
  • IrInSubria (University of Insubria) (submittedVersion)
Topics
  • Social Sciences › Economics, Econometrics and Finance › Finance › Banking stability, regulation, efficiency
  • Social Sciences › Business, Management and Accounting › Accounting › Financial Distress and Bankruptcy Prediction
  • Social Sciences › Business, Management and Accounting › Accounting › Corporate Finance and Governance
Keywords
soft information, organizational distance, bank lending decisions, default prediction, organizational hierarchy

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