Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5107315 | Research in International Business and Finance | 2017 | 39 Pages |
Abstract
Using confidential data on a large sample of relationship lending, we analyze the determining factors of the collateralization of business loans from banks, distinguishing between firms with observable risk and firms with hidden information. We achieve three main results. First, we provide evidence that observably riskier borrowers are encouraged to give more collateral to banks to obtain a loan, whereas firms with hidden information are less risky borrowers, offering collateral to signal their quality. Second, we show that relationship banking has a direct impact on the use of collateral and produces moderating effects on the other determining factors. Finally, we observe that distant bank branches-i.e., branches that encounter greater difficulties collecting soft information and obtaining site-specific data from headquarters-are more likely to require collateral than local bank branches.
Related Topics
Social Sciences and Humanities
Business, Management and Accounting
Business and International Management
Authors
Antonio Meles, Claudio Porzio, Gabriele Sampagnaro, Maria Grazia Starita, Vincenzo Verdoliva,