Loan Monitoring and Bank Risk

摘要: We study two issues: the relationship between loan monitoring and risk corporate value of banks' investments in systems. find that dynamic loans, where bank is scanning real time for events may be relevance to quality, tend increase incentive hold risky which turn increases regulatory burden bank. The profitability improved must balanced against cost regulation, we show trade off negative. This can explain trend banking switching away from systems credit scoring use only currently available information produce a signal without future time. matters sense loans efficient assessing quality certain classes borrowers -- informationally challenging ones are relatively ineffective. discuss implications this finding.