Do bank hierarchies affect the use of guarantees?

This paper studies how bank managers’ hierarchy influences guarantee use. Analyzing 17,900 Italian loan contracts, we show lower-level managers mitigate information asymmetries via relationship lending, while higher-level managers rely on quantitative data, increasing guarantee requirements. Results remain robust across subsamples. • Lower-level managers rely more on soft information and relationship lend- ing to ease credit constraints. • Higher-level managers demand more guarantees based on hard information • Personal guarantees are the preferred risk mitigation tool over collateral. • Strong bank-firm ties reduce the likelihood of personal guarantees.