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New Ventures and their Credit Terms

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Author Info
Aoife Hanley ()
Sourafel Girma

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Abstract

Using UK bank data for 466 new venture loan applications, we explore the determinants of interest margin, the sanctioning decision and the amount borrowed when these factors are considered simultaneously. Collateral levels greatly influence the size of credits to new ventures, a finding consistent with existing work on firm foundation rates and assets (Black et al., Economic Journal 106, 60–75, 1996; de Meza and Webb, The Economic Journal 109, 153–163, 1999; Evans and Jovanovic, Journal of Political Economy 97(4), 808–827, 1989; Holtz-Eakin et al., 1994). Consistent with the RAND Journal of Economics 25, 334–347, Diversionary Models of debt, firms with larger credits enjoy discounted interest margins even when we have controlled for firm size. Copyright Springer 2006

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File URL: http://hdl.handle.net/10.1007/s11187-005-3200-4
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Publisher Info
Article provided by Springer in its journal Small Business Economics.

Volume (Year): 26 (2006)
Issue (Month): 4 (05)
Pages: 351-364
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:kap:sbusec:v:26:y:2006:i:4:p:351-364

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Web page: http://www.springerlink.com/link.asp?id=100338

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Related research
Keywords: collateral; entrepreneurship; information asymmetry; interest margins; D82; D81;

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    1. Jae Kang & Almas Heshmati, 2008. "Effect of credit guarantee policy on survival and performance of SMEs in Republic of Korea," Small Business Economics, Springer, vol. 31(4), pages 445-462, December. [Downloadable!] (restricted)
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    This page was last updated on 2009-11-25.

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