Banking relationship and default priority in consumer credit: Evidence from Thai microdata

Kanis Saengchote and Krislert Samphantharak

Emerging Markets Review, 2022, vol. 52, issue C

Abstract: Banks play an important role in consumer credit, and when borrowers face a decision on whether to default on mortgage or non-mortgage loans first, banking relationship may matter. Our study provides first evidence into the interplay between banking relationship and consumer default priority via credit bureau data of 1 million individuals in Thailand. We find that same-bank borrowers are less likely to default on mortgage loans first, and borrowers with longer banking relationship and lower switching cost are more likely to default on mortgage loans first (which is welfare-improving). Our results suggest that banking relationship can lead to better outcomes for defaulting borrowers even when switching cost is high.

Keywords: Mortgage loan; Unsecured debt; Pecking order; Banking relationship (search for similar items in EconPapers)
JEL-codes: G21 G33 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ememar:v:52:y:2022:i:c:s1566014122000218

DOI: 10.1016/j.ememar.2022.100904

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