Research On The Impact Of Soft Information On Bank Credit

Information is the basis of all financial activities.Due to the different application methods of information,financial markets and financial institutions present different transaction forms of transactions.The way of information application is closely related to the characteristics of information itself.Hard information has the advantage of codeable and digitizable,thus effectively improves the efficiency of financial activities and reduces the cost of financial services.Unlike hard information,soft information is more subjective,thus difficult to be encoded or qualified,and easy to be distorted in the tranmit process.Besides,soft information's collection,processing and application in decision making are difficult to exist independently of the information collector,showing the feature of high collection cost and conversion cost,that is,the usage of soft information is hard to form scale effect,meaning the efficiency is lower and financial service costs higher.The emergence of internet technology and big data has given new solutions to this problem.Information technology could realize the hardening of soft information,help financial institutions use soft information to alleviate the financial exclusion of enterprises with insufficient hard information,also helps with judging the accuaracy of hard information.Information technology could reduce the cost of producing,collecting and processing soft information.Therefore,with the development of information technology,financial services and products based on soft information have emerged.Financial service innovation such as Internet finance has also become popular.In year 2019,the People's Bank of China issued the FINTECH development plan(2019-2021),which explicitly calls for the application of scientific and technological achievements such as artificial intelligence,mobile Internet,big data and cloud computing,speeding up the improvement of credit evaluation models on small and micro enterprises,private enterprises and science and high-tech enterprises,guiding credit bureaus to use alternative data to assess enterprises,and ease the difficulty of enterprise financing.The core problem of financing constraints for SMEs(short for small and medium sized enterprises)lies in the information asymmetry.As SMEs lack hard information which based on financial data,lack collaterals or guarantee,it is an effective way to solve the problem of information constraint to search for the alternative information of enterprises.Commercial Banks,for example,have introduced a tax-for-loan interactive model that allows companies to trade their good tax histories for bank credit.Before studying how to use the soft information,does the soft information of the enterprise have credit value,could it provide incremental information beyond the hard information? Could banks identify and exploit the soft information of enterprises? This is the first issue discussed in this paper.With the popularization of the Internet and rapid development of big data technology,commercial banks have further deployed financial technology.For the credit of small,medium and micro enterprises,financial constraint of enterprises would be alleviated if the credit value of enterprise soft information can be effectively used;Credit bureaus will also be able to apply financial technology to innovate credit services for SMEs,and explore the use of pre-loan alternative data to help banks judge the quality of the enterprises in multi-dimensional way.Could information technology enhance banks' ability to identify soft information? From the perspective of information channel,what impact will credit acquisition and information technology progress have on bank credit activities,and what would happen between the two mechanisms? This paper will also study this issue.Therefore,focusing on the credit asymmetry between banks and enterprises,this paper mainly discusses the credit value of soft information and its application in the banking industry,and analyzes the influence of credit acquisition and information technology on the credit activities of banks,expecting to provide some enlightenment for the financing of SMEs.The main contents of this paper include a summary of the existing literature and the empirical research on the bank-enterprise information asymmetry.Specifically:Firstly,this paper summarizes the related research on bank-enterprise credit activities.Starting from the factors that affect the credit activities,this paper sorts out several documents which are based on the credit acquisition activities,banking market structure,collateral,guarantee and legal system.From the perspective of soft information,this paper sorts out the existing literature on the impact of information technology on credit activities,laying foundation for empirical analysis.Secondly,this paper analyzes the current situation and theory of soft information application.This paper builds a model of bank size discrimination on the basis of the information asymmetry problem,and finds that,compared with large enterprises,small enterprises lack hard information,or have lower quality of information,which leads to lower precision of information.On the premise of the same hard information signal,the bank agrees more with the quality of big enterprises,which leads to the size discrimination to the small enterprise.Information technology can unleash soft information based signals,improve the precision of hard information,thus reduce information asymmetry,and reduce bank size discrimination against small businesses.Even if banks are biased against small businesses based on their beliefs,information technology can also reduce the degree of discrimination,but the degree of reduction is relatively weak.The addition of soft information have two effects: if it adds positive information about the enterprise,the degree of banks' size discrimination against small enterprises will be further weakened,and when soft information increases the negative information of enterprises,receiving the same hard information and soft information signals,the extent of banks discrimination against small businesses may actually increase.Thirdly,the paper studies whether the soft information has credit value based on the loan application data of Shanghai Zhengyindan project.The project is aimed at small and medium-sized technology enterprises in Shanghai,which can obtain loans after being screened twice by the government and banks.In this paper,the text information in the application data which is filled by the enterprises themselves and with no standard format is used as the soft information can significantly increase the availability of finance for small companies.In addition to financial information and government certification information,the company's own profile,as well as a description of the main business,an introduction to the management team and an explanation of the purpose of the loan,can affect the availability of corporate finance.And this effect is more pronounced for firms with a higher degree of information asymmetry.In addition to hard information,the ability of models with text information to predict the availability of financing increases,suggesting that outside of hard information,the soft information represented by the text of the loan description can provide incremental information,it contains the related information of the credit ability of the enterprise and thus has credit value.This paper also finds that risk sharing scheme can alleviate the information asymmetry problem between bank and enterprise.With the third-party guarantee or risk-sharing design,the bank's post-loan risk is reduced.Soft information or even financial information no longer influences the bank's loan decision.When banks decide whether to lend to a secured enterprise,not only does the text of the loan description,but even hard information such as financial information no longer affect the business' s credit availability,banks are more favor the enterprises with no previous credit history.Fourthly,this paper studies how the soft information affects the credit activity of the enterprise by taking the managerial ability as an example.Whether banks can identify soft information is unclear because of the risk sharing in the project and because the government has screened the enterprises before the banks make loan decisions to them.If there is no government screening process,the reason why banks could not directly identify the soft information of these enterprises might be that,compared with large enterprises,these SMEs requires higher cost of post-loan risk control and other serverices,so it is not cost-effective for banks,hence these SMEs are usually not customer of banks.But we couldn't conclude that banks cannot identify soft information.The character and ability of the owner,the core founder and the management team are closely related to the management of the enterprise.From the perspective of managerial ability,this paper finds that the higher the managerial ability,the more the loan from the bank,and the lower the financing cost,which shows that the bank can identify the soft information of managerial ability,and bank's decisionmaking is influenced.The empirical study also shows that the value of soft information is more significant in enterprises with lower quality of information disclosure and higher degree of information opacity.Finally,this paper studies the relation of information technology and banks' identification of soft information.This paper continues the anlyasis of research on managerial ability,and finds that fintech improve banks' ability to identify soft information.Then,from the perspective of information source,this paper discusses the influence of credit acquisition and information technology progress on bank credit.In credit activities,the application of credit reporting by banks and the independent use of information technology by banks can reduce the information asymmetry of banks and enterprises,the reputation restriction mechanism of credit reporting,and the postcredit supervision by banks could both reduce the post-loan risk,so credit acquisition and information technology can promote the scale of bank credit and reduce the risk of bank credit.In the process of credit acquisition activities promoting credit performance,the progress of information technology shows different effects: first,it strengthens the promotion of credit acquisition activities on credit scale;second,it shows an alternative role on the impact of the credit information activities on the credit risk reduction.Compared with public credit registries,private credit bureaus have effectively utilized the advantages of information technology and promoted the growth of credit scale while controlling credit risk.Based on the existing literature,the main innovations of this paper are as follows:Firstly,the existing literature on the analysis of soft information are mainly from the individual perspective,examining how the behavior of individuals influence the availability of network lending,but there is rarely research that directly based on corporate soft information on the availability of corporate credit.In Chapter 4,based on the loan application data of enterprises,especially the text information that enterprises fill out independently,the influence of soft information on the availability of enterprise credit is studied more directly.As soft information is directly related to the business management,which generally includes the personality and ability of the business owner and the core management team,Chapter 4 further quantifies the information elements contained in the introduction of manager team;while Chapter 5 and Chapter 6 verifies the influence of soft information on the scale and cost of enterprise credit using the managerial ability to proxy for soft information.Secondly,the research design of this paper clearly highlights the role of soft information.In the empirical design of Chapter 3,the applicant enterprise of the project of politics and banks is a small and medium-sized enterprise of science and technology,and the problem of its lack of hard information is more significant because of the dual nature of science and technology and small and medium-sized enterprises.In Chapter 5 and Chapter 6,when analyzing the soft information influence from the perspective of managerial ability,the construction of the managerial ability index has excluded the enterprise's basic factor,thus get rid of the influence of hard information such as financial status,so we can examine the influence of soft information on bank credit more cleanly.Thirdly,the thesis enriches the research on the subject of guarantee and soft information based on the data of enterprise application of Shanghai Zhengyindan project.First,by comparing the standard difference between the government and the bank,this paper highlights the effective effect of the guarantee on the information asymmetry problem.This paper finds that with guarantee,no matter hard information or soft information,they both have no significant impact on the bank's credit decisions.Second,because the nature of guarantee is credit guarantee,this paper is different from the research of soft information and bank credit,and it also supplements the research of soft information's influence on policy guarantee from guarantee decision.Finally,this paper not only verifies the role of information technology in digging out the credit value of soft information,from the perspective of information technology progress,it also innovatively emphasizes the positive significance of information technology progress to credit acquisition activities,enriches the discussion of impact of technology progress on financial institutions.In the credit acquisition's function,unlike the research that compare the big data credit investigation and traditional credit investigation,this article focuses on the effect of information technology progress on private credit bureaus and public credit registries.In addition,in the index design,this paper takes the credit acquisition coverage degree of a country as the larger value of the private credit bureaus coverage rate and the public credit registries coverage rate,while reasonably describing the credit investigation activity coverage level,avoiding the limitation of using only private or public coverage indicators and the double calculation error caused by the overlap of the two coverage rates.