||Relationship lending and the role of loan officers in China: Empirical analysis based on the data on companies in industrial clusters
Relationship lending refers to lending behavior in which a financial institution makes loan decisions based on the accumulated soft information on the borrower. Empirical studies have revealed its positive effect on lending. However, who generates and accumulates such soft information and in what way has never been analyzed empirically. This paper aims to explain empirically whether loan officers play a role in generating soft information in relationship lending by using a questionnaire survey conducted among SMEs located in the apparel industry clusters in the Zhejiang and Jiangsu provinces. In particular, this study performs the following two analytical tasks: First, by explaining loan officers’ characteristics and activities, as well as how they relate to the soft information generated on company, the actual financing activities of loan officers are clarified, and it can be seen whether they play an important role. Second, if it becomes clear that loan officers are important and that the soft information they generate has a positive impact on actual relationship lending, it can be concluded that relationship lending has its merits. This study used micro data on industrial clusters in analyses to demonstrate empirically the role of a bank’s loan officer in the process of generating and accumulating soft information at the time of conducting financial transactions with SMEs. The importance of relationship banking in China is recognized even more based on the results of this study, pertaining to the role of loan officers.