The role of soft information in a dynamic contract setting: Evidence from the home equity credit market

Sumit Agarwal, Brent W. Ambrose, Souphala Chomsisengphet, Chunlin Liu

Research output: Contribution to journalArticle

21 Citations (Scopus)

Abstract

Credit underwriting is a dynamic process involving multiple interactions between borrower and lender. During this process, lenders have the opportunity to obtain hard and soft information from the borrower. We analyze more than 108,000 home equity loans and lines-of-credit applications to study the role of soft and hard information during underwriting. Our data set allows us to distinguish lender actions that are based strictly on hard information from decisions that involve the collection of soft information. Our analysis confirms the importance of soft information and suggests that its use can be effective in reducing overall portfolio credit losses ex post.

Original languageEnglish (US)
Pages (from-to)633-655
Number of pages23
JournalJournal of Money, Credit and Banking
Volume43
Issue number4
DOIs
StatePublished - Jun 1 2011

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Dynamic contracts
Equity
Credit markets
Credit
Soft information
Underwriting
Loans
Interaction
Dynamic process

All Science Journal Classification (ASJC) codes

  • Accounting
  • Finance
  • Economics and Econometrics

Cite this

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The role of soft information in a dynamic contract setting : Evidence from the home equity credit market. / Agarwal, Sumit; Ambrose, Brent W.; Chomsisengphet, Souphala; Liu, Chunlin.

In: Journal of Money, Credit and Banking, Vol. 43, No. 4, 01.06.2011, p. 633-655.

Research output: Contribution to journalArticle

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