Bank competition and collateral: theory and evidence
Laurent Weill () and
Christophe Godlewski ()
No 27/2008, Research Discussion Papers from Bank of Finland
We investigate the impact of bank competition on the use of collateral in loan contracts. We develop a theoretical model incorporating information asymmetries in a spatial competition framework where banks choose between screening the borrower and asking for collateral. We show that presence of collateral is more likely when bank competition is low. We then test this prediction empirically on a sample of bank loans from 70 countries. We estimate logit models where the presence of collateral is regressed on bank competition, measured by the Lerner index. Our empirical tests corroborate the theoretical predictions that bank competition reduces the use of collateral. These findings survive several robustness checks.
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7) Track citations by RSS feed
Published in Published in Journal of Financial Services Research, Volume 44, Issue 2, October 2013: 131-148
Downloads: (external link)
Journal Article: Bank Competition and Collateral: Theory and Evidence (2013)
Working Paper: Bank Competition and Collateral: Theory and Evidence (2008)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:bof:bofrdp:2008_027
Access Statistics for this paper
More papers in Research Discussion Papers from Bank of Finland Bank of Finland, P.O. Box 160, FI-00101 Helsinki, Finland. Contact information at EDIRC.
Bibliographic data for series maintained by Minna Nyman ().