Overview and details of the sessions of this conference. Please select a date or location to show only sessions at that day or location. Please select a single session for detailed view (with abstracts and downloads if available).
Please note that all times are shown in the time zone of the conference. The current conference time is: 3rd Nov 2025, 12:32:37am CET
5A: Informed lending
Time:
Tuesday, 13/May/2025:
1:30pm - 3:00pm
Session Chair: Johan Hombert
Location: Amphi S, Le Cercle Building
Presentations
Information about climate transition risk and bank lending
Bhavyaa Sharma
UCSC, United States of America
Discussant: Thorsten Martin (Frankfurt School of Finance & Management)
Do banks price their borrowers' exposure to climate transition risk? I find that in the E.U., firms negatively exposed to climate transition risk face higher lending rates by banks specialized in their borrowers' industry. However, I also find evidence of lower lending rates to more exposed firms after an oil supply news shock relevant for energy-intensive firms, especially during periods of high aggregate financial stress. Interpreting bank specialization as a source of heterogeneity in costs of private information acquisition, I develop a bank lending model with competitive lending, costly information acquisition, and non-Bayesian belief updating. Because of screening, specialized banks can better distinguish between borrowers' risk exposure, resulting in relatively higher lending rates to more exposed firms. However, this interest rate differential decreases in favor of more exposed borrowers when banks underreact to relevant public information. This effect is more pronounced during periods of poor borrower quality or increased financial stress. These results imply that lowering banks' cost of acquiring firm-level transition-risk exposure information is crucial to reduce green firms' financing costs, even when there is high quality public information and communication about decarbonization.
“If You Don't Know Me by Now ...” Banks’ Private Information and Relationship Length
Stijn Claessens1 , Teng Wang 2 , Steven Ongena3
1 Yale University; 2 Federal Reserve Board; 3 University of Zurich
Discussant: Mitchell Petersen (Northwestern University)
Does the private information banks generate about their corporate borrowers deepen and
change in nature over time, and if so, how? Exploiting the comprehensive Federal
Reserve’s supervisory dataset, we distinguish two dimensions to the private information
embedded in internal credit ratings: depth and direction (better or worse), which we
confirm to correlate with loan terms. Longer firm-bank relationships deepen private
information in both directions, with effects often strongly nonlinear and peaking at about
five years. Learning effects are particularly salient for smaller and leveraged firms,
smaller, leveraged, and illiquid banks, at longer firm-bank distances, and during non-
COVID times.
