Collateral and repeated lending

Artashes Karapetyan and Bogdan Stacescu
Additional contact information
Artashes Karapetyan: Norges Bank (Central Bank of Norway)
Bogdan Stacescu: BI Norwegian Business School,

No 2012/18, Working Paper from Norges Bank

Abstract: Lending is often associated with significant asymmetric information issues between suppliers of funds and their potential borrowers. Banks can screen their borrowers, or can require them to post collateral in order to select creditworthy projects. We find that the potential for longer-term relationships increases banks' preference for screening. This is because posting collateral only provides the information that the current project of a given borrower is of good quality, whereas screening provides information that can be used in evaluating future projects as well as the current ones.

Keywords: Collateral; Screening; Bank relationships (search for similar items in EconPapers)
JEL-codes: G21 L13 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2012-12-18
New Economics Papers: this item is included in nep-ban, nep-cta, nep-mic and nep-ppm
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.norges-bank.no/en/news-events/news-pub ... pers/2012/WP-201218/

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bno:worpap:2012_18

Access Statistics for this paper

More papers in Working Paper from Norges Bank Contact information at EDIRC.
Bibliographic data for series maintained by ().