Collateral-Based Lending in Emerging Markets: Evidence from Thailand

Lukas Menkhoff, Doris Neuberger and Chodechai Suwanaporn
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Chodechai Suwanaporn: Chulalongkorn University, Thailand

Finance from University Library of Munich, Germany

Abstract: This paper examines the role and determinants of collateral in emerging markets compared to mature ones. Analyzing a data set of 560 credit files of Thai commercial banks, we find that both the incidence and degree of collateralization are higher there than in developed markets. Thai banks use collateral primarily to reduce the higher credit risks of small and relatively young firms. Long credit relationships do not reduce collateral requirements by lowering information asymmetry. Market imperfections result from housebanks demanding higher collateral than non-housebanks, suggesting a lock-in effect for their borrowers, and from larger banks realizing higher collateral claims.

Keywords: Bank lending; collateral; credit risk; relationship lending; emerging economies (search for similar items in EconPapers)
JEL-codes: G O (search for similar items in EconPapers)
Pages: 31 pages
Date: 2005-01-14
New Economics Papers: this item is included in nep-cfn, nep-fin and nep-sea
Note: Type of Document - pdf; pages: 31
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Citations: View citations in EconPapers (5)

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Journal Article: Collateral-based lending in emerging markets: Evidence from Thailand (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpfi:0501008

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