Related Lending

Rafael La Porta (), Florencio Lopez-de-Silanes () and Guillermo Zamarripa ()
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Guillermo Zamarripa: General

Yale School of Management Working Papers from Yale School of Management

Abstract: In many countries, banks lend to firms controlled by the bank's owners. We examine the benefits of related lending using a newly assembled dataset for Mexico. Related lending is prevalent (20% of commercial loans) and takes place on better terms than arm's-length lending (annual interest rates are 4 percentage points lower). Related loans are 33% more likely to default and, when they do, have lower recovery rates (30% less) than unrelated ones. The evidence supports the view that rather than enhance information sharing, related lending is a manifestation of looting.

JEL-codes: G2 G3 (search for similar items in EconPapers)
Date: 2002-03-31
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Related works:
Working Paper: Related Lending (2002)
Journal Article: Related Lending (2003)
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Persistent link: http://EconPapers.repec.org/RePEc:ysm:somwrk:ysm268

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