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Collateral and Adverse Selection in Transition Countries

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  • Laurent Weill
  • Christophe J. Godlewski

Abstract

This paper tackles the question of knowing whether collateral helps to solve adverse selection problems in transition countries. We use a unique data set of about four hundred bank loans in sixteen transition countries. Our findings support the view of a positive link between the presence of collateral and the risk premium, which accords with the observed risk hypothesis. This suggests that collateral does not mitigate adverse selection problems in transition countries.

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Bibliographic Info

Article provided by M.E. Sharpe, Inc. in its journal Eastern European Economics.

Volume (Year): 47 (2009)
Issue (Month): 1 (January)
Pages: 29-40

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Handle: RePEc:mes:eaeuec:v:47:y:2009:i:1:p:29-40

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Web page: http://mesharpe.metapress.com/link.asp?target=journal&id=106044

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  1. Bratkowski, A. & Grosfeld, I. & Rostowski, J., 1998. "Investment and Finance in De Novo Private Firms: Empirical Results form the Czech Republic, Hungary and Poland," DELTA Working Papers 98-19, DELTA (Ecole normale supérieure).
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  7. Jimenez, Gabriel & Saurina, Jesus, 2004. "Collateral, type of lender and relationship banking as determinants of credit risk," Journal of Banking & Finance, Elsevier, vol. 28(9), pages 2191-2212, September.
  8. Andrzej Bratkowski & Irena Grosfeld & Jacek Rostowski, 1999. "Investment and Finance in De Novo Private Firms: Empiracal Results from the Czech Republic, Hungary and Poland," William Davidson Institute Working Papers Series 236, William Davidson Institute at the University of Michigan.
  9. Allen N. Berger & Gregory F. Udell, 1988. "Collateral, loan quality, and bank risk," Finance and Economics Discussion Series 51, Board of Governors of the Federal Reserve System (U.S.).
  10. Simeon Djankov & Caralee McLiesh & Andrei Shleifer, 2005. "Private Credit in 129 Countries," NBER Working Papers 11078, National Bureau of Economic Research, Inc.
  11. Régis Blazy & Laurent Weill, 2013. "Why do banks ask for collateral in SME lending?," Applied Financial Economics, Taylor & Francis Journals, vol. 23(13), pages 1109-1122, July.
  12. Jimenez, Gabriel & Salas, Vicente & Saurina, Jesus, 2006. "Determinants of collateral," Journal of Financial Economics, Elsevier, vol. 81(2), pages 255-281, August.
  13. Besanko, David & Thakor, Anjan V, 1987. "Collateral and Rationing: Sorting Equilibria in Monopolistic and Competitive Credit Markets," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 28(3), pages 671-89, October.
  14. David T. Llewellyn, 2002. "An analysis of the causes of recent banking crises," The European Journal of Finance, Taylor & Francis Journals, vol. 8(2), pages 152-175, June.
  15. Gabriel Jiménez & Jesús Saurina, 2004. "Collateral, type of lender and relationship banking as determinants of credit risk," Banco de Espa�a Working Papers 0414, Banco de Espa�a.
  16. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
  17. Bester, Helmut, 1985. "Screening vs. Rationing in Credit Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 75(4), pages 850-55, September.
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Cited by:
  1. repec:onb:oenbwp:y:2010:i:1:b:1 is not listed on IDEAS
  2. Hall, Thomas W., 2012. "The collateral channel: Evidence on leverage and asset tangibility," Journal of Corporate Finance, Elsevier, vol. 18(3), pages 570-583.

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