Are Loans Cheaper when Tomorrow seems Further ?

Christophe Godlewski and Laurent Weill

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Abstract: This paper studies how future tense marking affects the terms of bank loans. We predict that languages that grammatically mark the future affect speakers' intertemporal preferences and thereby reduce the perception of the risks associated with loan issuance. We test this hypothesis on a sample of 977 bank loans from 17 European countries. We observe that the use of a language with future tense marking is associated with lower loan spreads and lower collateral use in loan contracts. The results corroborate Chen (American Economic Review, 2013)'s hypothesis that future tense marking makes the future more distant than the present. They suggest that linguistic structure affects terms of loan contracts. JEL Codes: D83, G20, G41, Z13.

Keywords: language; bank; loans (search for similar items in EconPapers)
Date: 2020-03
New Economics Papers: this item is included in nep-ban
Note: View the original document on HAL open archive server: https://hal.science/hal-02500459
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Published in Economic Modelling, 2020, ⟨10.1016/j.econmod.2020.02.046⟩

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Journal Article: Are loans cheaper when tomorrow seems further? (2021)
Working Paper: Are Loans Cheaper when Tomorrow seems Further ? (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-02500459

DOI: 10.1016/j.econmod.2020.02.046

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