TY  - SER
AU  - Bryan, Gharad
AU  -  Karlan, Dean
AU  -  Osman, Adam
TI  - Big Loans to Small Businesses: Predicting Winners and Losers in an Entrepreneurial Lending Experiment
SN  - 0002-8282
PB  - American Economic Review
KW  -  Depository Institutions
KW  -  Financial Risk and Risk Management
KW  -  Micro Finance Institutions
KW  -  Mortgages, Financing Policy
KW  -  Value of Firms
KW  - Capital and Ownership Structure
N2  - We experimentally study the impact of relatively large enterprise loans in Egypt. Larger loans generate small average impacts, but machine learning using psychometric data reveals "top performers" (those with the highest predicted treatment effects) substantially increase profits, while profits drop for poor performers. The large differences imply that lender credit allocation decisions matter for aggregate income, yet we find existing practice leads to substantial misallocation. We argue that some entrepreneurs are overoptimistic and squander the opportunities presented by larger loans by taking on too much risk, and show the promise of allocations based on entrepreneurial type relative to firm characteristics
UR  - https://www.aeaweb.org/articles?id=10.1257/aer.20220616
ER  -