Template-Type: ReDIF-Paper 1.0
Author-Name: Stefania Cosci 
Author-X-Name-First: Stefania
Author-X-Name-Last: Cosci
Author-Email: s.cosci@lumsa.it
Author-Workplace-Name: LUMSA University 
Author-Name: Valentina Meliciani 
Author-X-Name-First: Valentina 
Author-X-Name-Last: Meliciani
Author-Email: vmeliciani@unite.it.
Author-Workplace-Name: University of Teramo
Author-Name: Valentina Sabato
Author-X-Name-First: Valentina 
Author-X-Name-Last: Sabato
Author-Email: v.sabato@lumsa.it
Author-Workplace-Name: LUMSA University
Title: Bank Cross-Selling And The Production Of Soft Information

Abstract: We model the effect of cross-selling on the quality of banks’ loans and interest rates under alternative lending technologies when banks produce both hard and soft information. The main theoretical findings are: i) when banks adopt transaction lending technologies, where loan officers have only the task of screening loan applicants, cross-selling lowers banks incentives of producing soft information and loans’ quality, ii) when banks adopt relationship lending technologies, where loan officers have the task of both screening and cross-selling services, cross-selling may improve banks’ incentives of producing soft information and loans quality, iii) under relatively competitive market conditions, cross-selling reduces lending interest rates for both transaction- and relationship-lending banks. The econometric analysis, carried on a sample of European banks over the period 2001-2006, support these findings. The results suggest regulators should address cross-selling strategies to control for bank risk in different ways depending on the lending technology adopted by banks.

Length: 35 pages
Creation-Date: 2014-06
Publication-Status:
File-URL: https://repec.lumsa.it/wp/wpC02.pdf
File-Format: Application/pdf
Number: wpC02
Classification-JEL: G21, D82, C23, L15
Keywords: Cross-selling; Hard and soft information; Relationship lending; Loans’ quality; Interest margin
Handle: RePEc:lsa:wpaper:wpC02