Paying back to borrow more: Reputation and bank credit access in early America

Ta-Chen Wang

Explorations in Economic History, 2008, vol. 45, issue 4, pages 477-488

Abstract: The birth of commercial banking in New England after the American Revolution provides an important case to examine banking development under asymmetric information. Similar to credit markets in developing countries today, bank borrowers of early America usually had little or no collateral. This paper uses a unique data set based on loans between 1803 and 1833 for Plymouth Bank to examine bank lending policies in the absence of collateral. Empirical evidence suggests that borrowers with little collateral established their credit-worthiness through repeated interaction with banks.

Keywords: Banking; Collateral; Reputation; Lending (search for similar items in EconPapers)
Date: 2008

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Persistent link: http://EconPapers.repec.org/RePEc:eee:exehis:v:45:y:2008:i:4:p:477-488

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