scholarly journals Substitution or Complementarity between 'Soft' Information and 'Hard' Information: Why and Which Effect on Bank Profitability?

2010 ◽  
Author(s):  
Hervé Alexandre ◽  
Aymen Smondel
Keyword(s):  
Soft Information ◽  
Bank Profitability ◽  
Hard Information

scholarly journals Selecting Applicants

Econometrica ◽  
2021 ◽  
Vol 89 (2) ◽  
pp. 615-645
Author(s):  
Alex Frankel
Keyword(s):  
Test Score ◽  
Acceptance Rate ◽  
Soft Information ◽  
Test Results ◽  
Hard Information ◽  
Rate Functions ◽  
Simple Implementation ◽  
Acceptance Rates ◽  
Test Result

A firm selects applicants to hire based on hard information, such as a test result, and soft information, such as a manager's evaluation of an interview. The contract that the firm offers to the manager can be thought of as a restriction on acceptance rates as a function of test results. I characterize optimal acceptance rate functions both when the firm knows the manager's mix of information and biases and when the firm is uncertain. These contracts may admit a simple implementation in which the manager can accept any set of applicants with a sufficiently high average test score.

scholarly journals A Model for Lender-Borrower Trust in Peer-To-Peer Lending

2018 ◽  
Vol 9 (1) ◽  
pp. 15
Author(s):  
Dyah Wahyu Sukmaningsih
Keyword(s):  
Social Capital ◽  
Elaboration Likelihood Model ◽  
Soft Information ◽  
Financial Data ◽  
Trust Building ◽  
Elaboration Likelihood ◽  
Hard Information ◽  
Likelihood Model ◽  
Peer Lending ◽  
Determinant Factor

This research examined factors that influenced lender’s trust towards the borrower. The peerto-peer lending platform facilitated lending mechanism between lender and borrower. However, the loan was often considered as an unsecured loan, since there was a lack of traditional financial data. Using literature review, this research analyzed the determinant factor to establish trust between borrower and lender. Based on Elaboration Likelihood Model (ELM), the result of this research proposes a model for trust building between lender and borrower. The model categorizes information to establish trust into hard information, soft information, and social capital.

Information and Bargaining Power: Evidence from SME Lending in China

2015 ◽  
Vol 14 (04) ◽  
pp. 901-913
Author(s):  
Xiao-Yong Wang ◽  
Wei Zhang ◽  
Xiong Xiong ◽  
Hong-Li Che ◽  
Dehua Shen
Keyword(s):  
Bargaining Power ◽  
Soft Information ◽  
Loan Rate ◽  
Hard Information ◽  
Sme Lending

The bank has the access to hard and soft information about small and medium-sized enterprises (SMEs) in order to manage the informational opacity. We carry out the study about the information and bargaining power between lenders and borrowers. Bargaining power is depicted based on more favorable loan rate. The proxy is regressed on hard information, soft information and other variables. We find out that more favorable hard information (Registered Capital and Proceeds of Sale) increases borrowers' bargaining power in China. We also obtain evidence suggesting that the length of borrowers' business affect the bargaining power.

scholarly journals Soft and hard information in equity crowdfunding: network effects in the digitalization of entrepreneurial finance

2021 ◽  
Author(s):  
Saul Estrin ◽  
Susanna Khavul ◽  
Mike Wright
Keyword(s):  
Network Effects ◽  
Network Externalities ◽  
Information Provision ◽  
Network Size ◽  
Soft Information ◽  
Entrepreneurial Finance ◽  
Digital Environment ◽  
Equity Crowdfunding ◽  
Hard Information ◽  
Information Pooling

AbstractAs a digital financial innovation, equity crowdfunding (ECF) allows investors to exploit the complementarity of information provision and network effects in a reduced transaction cost environment. We build on the underlying distinction between soft and hard information and show that ECF platforms create an environment of greater information pooling that benefits from network externalities. We test our hypotheses using a unique proprietary dataset and find that soft information has a greater impact than hard on the likelihood that a financing pitch will be successful. Moreover, the effects of soft information are amplified by the size of the investor network on the platform and network size also positively moderates the effect of information on the amount invested during each pitch. We conclude that ECF platforms can successfully exploit low transaction costs of the digital environment and bring network externalities to bear on investor decisions. Taken together that these increase the supply of funds to entrepreneurs.

The Knowledge Sharing Model

2010 ◽  
pp. 1241-1263
Author(s):  
Gunilla Widén-Wulff ◽  
Reima Suomi
Keyword(s):  
Knowledge Sharing ◽  
Intellectual Capital ◽  
Value Chain ◽  
Information Resources ◽  
Soft Information ◽  
Insurance Companies ◽  
Business Success ◽  
Information Culture ◽  
Hard Information

This chapter works out a method on how information resources in organizations can be turned into a knowledge sharing (KS) information culture, which can further feed business success. This process is complicated, and the value chain can be broken in many places. In this study this process is viewed in the light of resource-based theory. A KS-model is developed where the hard information resources of time, people and computers are defined. When wisely used, these make communication a core competence for the company. As the soft information resources are added, that is the intellectual capital, KS, and willingness to learn, a knowledge sharing culture is developed, which feeds business success. This model is empirically discussed through a case study of fifteen Finnish insurance companies. The overall KS capability of a company corresponds positively to the different dimensions applied in the model. KS is an interactive process where organizations must work on both hard information resources, the basic cornerstones of any knowledge sharing, and makes constant investment into soft information resources, learning, intellectual capital and process design in order to manage their information resources effectively.

Loan Officer Incentives, Internal Rating Models, and Default Rates*

2019 ◽  
Vol 24 (3) ◽  
pp. 529-578 ◽  
Author(s):  
Tobias Berg ◽  
Manju Puri ◽  
Jörg Rocholl
Keyword(s):  
Order Effect ◽  
Foreign Exchange Rates ◽  
Bank Profitability ◽  
Return On Equity ◽  
Hard Information ◽  
Default Rates ◽  
Internal Rating ◽  
Loan Officer ◽  
Bank Behavior ◽  
Loan Officers

Abstract Manipulation of hard information has been at the center of a wave of investigations into fraudulent bank behavior, such as mis-selling of mortgages and rigging of London Interbank Offered Rate and Foreign Exchange rates. Despite these prominent cases, little is known as to why employees manipulate hard information. Using almost a quarter million retail loan applications, we show that loan officers who face volume-based incentives significantly manipulate ratings even in settings where ratings are computed using hard information only. Manipulation is widespread across loan officers, with low-performing loan officers manipulating more toward the end of the year. These incentives have a first-order effect on bank profitability, reducing return on equity by 1.5 percentage points. We conclude that reliance on hard information does not overcome loan officer agency problems, and it is important for banks and regulators to take manipulation of hard information into account when using hard information for risk assessment and regulation.

Improving assessment capability for accounts receivable pool financiers

2019 ◽  
Vol 120 (3) ◽  
pp. 547-566 ◽  
Author(s):  
Xiao Song ◽  
Hao Ying ◽  
Xiande Zhao ◽  
Lujie Chen
Keyword(s):  
Design Methodology ◽  
Financial Service ◽  
Soft Information ◽  
Easy Access ◽  
Information Structures ◽  
Critical Perspective ◽  
Upward Trend ◽  
Content Type ◽  
Accounts Receivable ◽  
Hard Information

Purpose The accounts receivable pool (ARP) is an e-invoice management system that provides suppliers with easy access to financial service. The purpose of this paper is to focus on the strength and weakness of ARP mechanism and suggest efficient methods to identify creditworthy borrowers. Design/methodology/approach By decomposing the sales records of 348 ARP borrowers and predicting the occurrence of overdue incidences, this study first portrays the creditworthy borrowers by sales features. Then, content analysis was applied to measure the loadings of soft and hard information, and examined the effectiveness of different information structures in creditworthiness assessment. Findings For ARP borrowers, upward trend and low volatility reveal their creditworthiness. In order to identify creditworthy borrowers beforehand, ARP financiers who have elaborated more soft information and less hard information can perform better. Originality/value This study first discussed ARP finance from a critical perspective and underlines borrower assessment to eliminate the defect of loose recourse. The empirical evidence presents the sales features of creditworthy borrowers. Moreover, the results suggest an efficient approach for ARP financiers to conduct better assessment.

The Knowledge Sharing Model

2010 ◽  
pp. 146-168
Author(s):  
Gunilla Widén-Wulff ◽  
Reima Suomi
Keyword(s):  
Knowledge Sharing ◽  
Intellectual Capital ◽  
Value Chain ◽  
Information Resources ◽  
Soft Information ◽  
Insurance Companies ◽  
Business Success ◽  
Information Culture ◽  
Hard Information

This chapter works out a method on how information resources in organizations can be turned into a knowledge sharing (KS) information culture, which can further feed business success. This process is complicated, and the value chain can be broken in many places. In this study this process is viewed in the light of resource-based theory. A KS-model is developed where the hard information resources of time, people and computers are defined. When wisely used, these make communication a core competence for the company. As the soft information resources are added, that is the intellectual capital, KS, and willingness to learn, a knowledge sharing culture is developed, which feeds business success. This model is empirically discussed through a case study of fifteen Finnish insurance companies. The overall KS capability of a company corresponds positively to the different dimensions applied in the model. KS is an interactive process where organizations must work on both hard information resources, the basic cornerstones of any knowledge sharing, and makes constant investment into soft information resources, learning, intellectual capital and process design in order to manage their information resources effectively.

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