The productivity nexus in credit markets: Assortative matching in Colombia

This paper examines the relationship between bank and firm productivity in the Colombian credit market. Using comprehensive data on firm balance sheets, bank financials, and credit relationships from 2000 to 2022, we document positive assortative matching between productive banks and productive firms. Our analysis reveals a positive correlation between bank productivity and borrowing firm productivity. While this correlation becomes statistically insignificant with time fixed effects, it has strengthened since 2016. These findings suggest that productive banks tend to lend to productive firms because they can better afford the screening costs necessary to identify high-quality borrowers.

11-06-2025