Showing 1 - 7 of 7
We investigate whether collateral helps to solve adverse selection problems. Theory predicts a negative relationship between presence of collateral and risk premium, as collateral constitutes a signalling instrument for the borrower to be charged with a lower risk premium. However, bankers’...
Persistent link: https://www.econbiz.de/10005509720
We investigate the impact of bank competition on the use of collateral in loan contracts. We develop a theoretical model incorporating information asymmetries in a spatial competition framework where banks choose between screening the borrower and asking for collateral. We show that the presence...
Persistent link: https://www.econbiz.de/10005509733
This paper aims at testing empirically the three major theoretical reasons why banks resort to collateral: reduction of loan loss in the event of default, adverse selection, and moral hazard. This investigation is performed by testing whether the reasons vary according to the type of collateral....
Persistent link: https://www.econbiz.de/10005509719
Persistent link: https://www.econbiz.de/10009309812
Persistent link: https://www.econbiz.de/10009247822
Persistent link: https://www.econbiz.de/10010200548
Persistent link: https://www.econbiz.de/10003779534