Abstract
This paper investigates how volume-based lending incentives affect the pricing of loans. Using a comprehensive loan record from a large Chinese bank, we examine the response of loan origination behavior to volume-based lending incentives. We observe a direct effect of volume-based lending incentives, with the number and volumes of loans rising near the month-end. Moreover, we identify a significant underpricing of risk in loans originated at the end of the month. Specifically, these loans exhibit higher risk, yet they are initially priced at a lower interest rate. This underpricing occurs through a combination of ranking pressure and overstate of hard information in loan screening.
Sign-in/Register to access full text options 
Free) 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
