Trust and Lending: An Experimental Study.

This paper investigates the importance and the determinants of trust in a lending situation using a controlled experiment. We find that communication can facilitate collaboration between lenders and borrowers through three channels of trust: (1) an information channel, (2) a preference channel, and (3) a reciprocity channel. Our results highlight the role of trust in mitigating the moral hazard problem in lending. [ABSTRACT FROM AUTHOR]