Title: Borrowers' perceptions of lending conditions: worlds apart or closer than close?

Authors: Dimitrios Anastasiou; Konstantinos Drakos

Addresses: Economic Research Division, Alpha Bank, Sofokleous 11, 10559, Athens, Greece; Department of Accounting and Finance, Athens University of Economics and Business, Patission 76, 10434, Athens, Greece ' Department of Accounting and Finance, Athens University of Economics and Business, Patission 76, 10434, Athens, Greece

Abstract: Given that lenders and borrowers interact in the same (credit) market, an interesting research question that arises is whether the demand side of the market correctly comprehends the actual credit market conditions that are primarily shaped by the supply side. We explore this by utilising available surveys conducted separately for the two sides of the credit market and empirically investigate whether, and by which mechanism, demand-side perceptions relate to supply-side credit conditions. Our results indicate that demand-side perceptions do not match one-for-one supply-side conditions, but are rather described by an adaptive mechanism. This mechanism suggests that demand-side perceptions are modified every period by a fraction of the last period's perception error. Additionally, we find that demand-side perceptions systematically overshoot the actual conditions, and this overshooting is accentuated for periphery countries and smaller firms.

Keywords: loan terms and conditions; bank lending conditions; bank lending survey; survey of access to finance; borrowers' perceptions.

DOI: 10.1504/IJBAAF.2021.116201

International Journal of Banking, Accounting and Finance, 2021 Vol.12 No.3, pp.285 - 307

Received: 12 Aug 2019
Accepted: 26 Aug 2020

Published online: 23 Apr 2021 *

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