Survey Data from Japanese Regional Banks and Using Soft Information in Lending Decisions

Abstract

This book investigates the role of relationship lending in Japanese local competitive markets. The authors used data from a 2008 survey by the Organization for Small and Medium Enterprises and Regional Innovation, Japan (SME Support, Japan) to extract soft information factors from questionnaire answers relative to the use of soft information in making lending decisions. Ultimately, the authors analyzed the influence of using soft information on lender performance. Therefore, this chapter first provides an overview of Japanese banking institutions as well as the characteristics of the small and medium-sized/regional financial institutions that comprise the analysis sample: regional banks, second-tier regional banks, and shinkin banks. Second, this chapter describes the survey questionnaire’s objectives and methods, and presents regional institutions’ current status regarding their use of soft information. Third, the chapter explains the factor analysis and the procedures to determine the number of underlying factors and retain the items that correlate to them. This chapter then incorporates the univariate analysis to further report the preliminary results of soft information’s influence on lender performance.