Credit negotiations

Credit negotiations can have real economic implications, especially for small firms that heavily rely on bank credit. We hypothesize and empirically establish through textual analysis that three characteristics reflecting credit negotiations are the time interval from loan application to approval or rejection, the probability of applying to another bank, and the probability of reapplying soon after a rejection. We show that poor and female entrepreneurs negotiate less vigorously, and identify several channels backing these effects, most notably education of loan applicants and firm R&D expenses. We also show how the identified effects influence loan approval and firm performance.