Does Bank Technology Impact Lending Decisions?

Abstract

I examine the effect that technology has on soft-information lending, and addresses issues within the banking literature on quantifying bank technology. I find that banks engage in less soft-information lending when back-office bank technology is more productive, and that banks engage in less soft-information lending when they own interactive web technology. I find that competition, lending decisions, and bank size are the primary drivers of technological development. I show that these results are robust to econometric tests which account for endogeneity; to an alternative definition of the bank's size; and to the inclusion of lending portfolio controls.