THE PROCYCLICAL LEVERAGE EFFECT OF COLLATERAL VALUE ON BANK LOANS—EVIDENCE FROM THE TRANSACTION DATA OF TAIWAN

Nan-Kuang Chen () and Hung-Jen Wang ()

Economic Inquiry, 2007, vol. 45, issue 2, 395-406

Abstract: We investigated the empirical relationship between firms’ collateral values and land‐secured loans over asset price cycles. A simultaneous equation model of loan demand and supply was estimated using a transaction‐level data set from Taiwan. The data set contains collateral information and identifies lenders and borrowers. We found that the value of collateralizable assets has positive and significant effects on loan amounts and that the leverage effect of collateral is procyclical to asset price cycles. Firms in the electronics industry, the star industry in the sample period, are found to borrow more than other firms do at each marginal dollar of collateral. (JEL C50, E30, G20)

Date: 2007
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (20)

Downloads: (external link)
https://doi.org/10.1111/j.1465-7295.2006.00015.x

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:bla:ecinqu:v:45:y:2007:i:2:p:395-406

Ordering information: This journal article can be ordered from
https://ordering.onl ... s.aspx?ref=1465-7295

Access Statistics for this article

Economic Inquiry is currently edited by Tim Salmon

More articles in Economic Inquiry from Western Economic Association International Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().