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Please use this identifier to cite or link to this item: http://hdl.handle.net/1942/1530

Title: Business collateral and personal commitments in SME lending
Issue Date: 2006
Publisher: Elsevier
Citation: Journal of Banking and Finance, 30(11). p. 3067-3086
Abstract: Using a database of SME credit approvals from a large Belgian bank, this paper extends the empirical evidence on the determinants of collateral by examining the determinants of business collateral simultaneously with the determinants of personal collateral/commitments. Our results suggest that firm and relationship characteristics seem to be more important determinants of collateral/commitment protection than loan and lender characteristics. Family firms are more likely to offer a higher degree of collateral/commitment protection while introducing competition between banks decreases this likelihood. The collateral requirement decreases in the length of the bank-borrower relationship. Furthermore, trade credit seems to have a signalling effect. The ‘lazy banks hypothesis’ was not supported. Our results suggest that beside risk arguments, also commercial arguments help explain the pledging of collateral. Using a continuation-ratio logit model, we discover several differences in the determinants of the collateralisation decision and the determinants of the type of collateral/commitments.
URI: http://hdl.handle.net/1942/1530
DOI: 10.1016/j.jbankfin.2006.05.003
ISI #: 000242315500007
ISSN: 0378-4266
Category: A1
Type: Journal Contribution
Validation: ecoom, 2007
Appears in Collections: Research publications

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