Abstract:
​Information production is a central feature of banking. Branch managers are able to directly monitor their borrowers, build relationships with them and acquire soft information, which is not coded in any bank database.
In this paper we measure the consequences of management turnover in banks for the allocation of credit in the economy. To do so we combine novel administrative data on the financial sector workforce and match it to credit registry data.
First, we show that 5 years after a branch managers leaves her branch, 40% of the client firms leave as well. Second, the new branch of the manager is 3.5 times more likely to establish a credit relationship with a former client of the manager.