Banks and Borrower Networks: To Lend or Not to Lend?

Banks remain the most important credit source globally despite large-scale financial development. However, banking continues to be plagued by rising costs and information asymmetry. In this context, we show how an additional borrower characteristic, specifically the borrower’s network strength, helps reduce costs by altering the bank’s lending decisions. The literature on borrower network remains largely empirical and borrower-based. We fill...