Can social capital variables help to determine loan to value approved by banks?

Abstract

This paper sheds some light on the effects of social capital variables (social network data, physical appearance, etc.) on loan-to-value (LTV), a crucial variable to evaluate systemic risk. Using a unique database created by merging several sources of data, we show that the introduction of social capital variables are shown to be statistically significantly related to LTV. In particular, Facebook likes in a month and creditworthiness are a negative determinant of LTV while beauty and certain personality traits play a role in borrowers obtaining a higher LTV. We distinguish these effects depending on the LTV variable used: loan-to-appraisal (entirely under the control of lender) and loan-to-transaction (in which the transaction price can also be influenced). [...]