 Information acquisition in SME's relationship lending and the cost of loansIrene Comeig, Matilde Fernandez-Blanco and Federico Ramírez Journal of Business Research, 2015, vol. 68, issue 7, 1650-1652 Abstract: This study analyzes the effect of the reputation SMEs get in a relationship lending on the cost of next loans. A unique dataset of 734 Spanish SMEs' relationship lending provides information on a loan-by-loan basis about the ex post previous loan performance, which measures reputation. No prior empirical research differentiates the cost of loans following a defaulted loan from the costs of those following a successfully repaid loan. Results show that lenders obtain information about borrowers' risk-level during relationship lending and use this information. Loans granted after a successful one pledge significantly lower collateral and interest rate than loans granted after a defaulted one. However, the pledged collateral is stronger in the second loan not only following a defaulted loan but also following a successfully repaid one. This result is consistent with the credit screening mechanism, in which good borrowers differentiate themselves from bad ones by pledging high collateral to get lower interest rates. Keywords: Asymmetric information; Collateral; Reputation; SMEs; Relationship lending (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jbrese:v:68:y:2015:i:7:p:1650-1652 DOI: 10.1016/j.jbusres.2015.02.012 Access Statistics for this article Journal of Business Research is currently edited by A. G. Woodside More articles in Journal of Business Research from Elsevier |
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