Monitoring in Originate-to-Distribute Lending: Reputation versus Skin in the Game

Andrew Winton, Vijay Yerramilli

Research output: Contribution to journalArticlepeer-review

3 Scopus citations


Banks face liquidity and capital pressures that favor selling off the loans they originate, but loan sales undermine their monitoring incentives. A bank's loan default history is a noisy measure of its past monitoring choices, which can serve as a reputation mechanism to incentivize current monitoring. In equilibrium, higher reputation banks monitor (weakly) more intensively; if retention is credible, they generally retain less of the loans they originate. Monitoring is difficult to sustain in periods with uncommonly large spikes in loan demand ("booms"), especially for low-reputation banks, which are more likely to accommodate boom demand and forgo monitoring.

Original languageEnglish (US)
Pages (from-to)5886-5932
Number of pages47
JournalReview of Financial Studies
Issue number12
StatePublished - Dec 1 2021

Bibliographical note

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© 2021 The Author(s) 2021. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For permissions, please e-mail:


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