Further Evidence on the Determinants of Secured versus Unsecured Loans
AbstractUsing a unique data set collected from financial statements of all Singapore listed firms from 1983 to 1991, we provide international evidence on the determinants of the amount of secured loans as a fraction of total secured and unsecured loans. This data set comprises a much wider range of firms than most previous studies. We show that consistent with the agency-cost hypothesis, firms with more growth opportunities use more secured loans. This is in contrast to the opposite result reported in Barclay and Smith (1995b) who measure secured debt as a fraction of total long-term fixed claims. We also find strong support for the hypothesis that smaller firms use more secured loans. In contrast, Leeth and Scott (1989), using survey data on small firms, find an insignificant firm size effect. Finally, we show that the use of secured loans is positively related to asset riskiness and loan size, and is negatively related to asset specificity. Firm quality has no explanatory power. Copyright Blackwell Publishers Ltd 1998.
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Bibliographic InfoArticle provided by Wiley Blackwell in its journal Journal of Business Finance & Accounting.
Volume (Year): 25 (1998-04)
Issue (Month): 3&4 ()
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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0306-686X
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- Heather M. Hulburt & Frederick C. Scherr, 2003. "Determinants of the collateralization of credit by small firms," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 24(6-7), pages 483-501.
- John Armour, 2006. "Should we redistribute in insolvency," ESRC Centre for Business Research - Working Papers wp319, ESRC Centre for Business Research.
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