Screening and Monitoring of Corporate Loans

Simon Mayer (HEC, Paris)

2 décembre 2022, 14h00–15h30


Salle Auditorium 4

Finance Seminar


How much of a loan should a lender dynamically retain and how does retention affect loan performance? We address these questions in a model in which a lender originates loans that it can sell to investors. The lender reduces default risk through screening at origination and monitoring after origination, but is subject to moral hazard. We show that the optimal lender-investor contract can be implemented by having the lender sell its stake in the loan over time, rationalizing loan sales after origination, and use the model to generate predictions linking loan characteristics to initial retention, sales dynamics, and loan performance.


dynamic agency; screening, monitoring; loan sales; loan performance.;

Codes JEL

  • G21: Banks • Depository Institutions • Micro Finance Institutions • Mortgages
  • G32: Financing Policy • Financial Risk and Risk Management • Capital and Ownership Structure • Value of Firms • Goodwill

Voir aussi