Journal of Banking & Finance Vol. 119 2020
Households rejecting loan offers from banks
Abstract
This paper studies the mechanism of adverse selection in the credit market using a sample of mortgage applications that are approved by lenders but rejected by applicants. We find that a low-risk applicant is more likely to reject a loan offer, except when the offer is made by an informed lender. Using jumbo mortgage and loan acceptance rate data to proxy for the information advantage, we find that lenders with a lower likelihood of being rejected are indeed better informed than others.
- DOI
- 10.1016/j.jbankfin.2018.04.018
- Volume
- 119
- Pages
- 105339
- Language
- en
- Sources
- openalex crossref bibtex:phds-export.bib