Relationships and Rationing in Consumer Loans

Sugato Chakravarty () and James S Scott

The Journal of Business, 1999, vol. 72, issue 4, 523-44

Abstract: We empirically examine how relationships between individual households and their creditors affect the probability of being credit-rationed. Using a data set where the credit-rationing of individual households is observed directly, we show that relationship duration and the number of activities between a family and a potential lender significantly lower the probability of being credit-rationed. Additionally, we examine the relative role of relationships in determining the interest rates of two consumer loans--a mortgage loan and a "special purposes" loan--and show that mortgage loan rates are driven less by relationship factors than the special purposes loan rates. Copyright 1999 by University of Chicago Press.

Date: 1999
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Persistent link: https://EconPapers.repec.org/RePEc:ucp:jnlbus:v:72:y:1999:i:4:p:523-44

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