Are loans cheaper when tomorrow seems further?

Christophe Godlewski and Laurent Weill

Economic Modelling, 2021, vol. 94, issue C, 1058-1065

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.

Keywords: Language; Bank; Loans (search for similar items in EconPapers)
JEL-codes: D83 G20 G41 Z13 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Are Loans Cheaper when Tomorrow seems Further ? (2020)
Working Paper: Are Loans Cheaper when Tomorrow seems Further ? (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:94:y:2021:i:c:p:1058-1065

DOI: 10.1016/j.econmod.2020.02.046

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