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On the rationale of bank lending in pre-crisis Thailand

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  • Lukas Menkhoff
  • Chodechai Suwanaporn

Abstract

Evidence from credit files is provided to examine bank lending determinants of Thai commercial banks. Their lending practice follows reasonable patterns as a standard set of variables, including indirect risk variables, explains much of the variance in interest rate spread. Reflecting institutional differences with mature markets, we find a higher importance of relationship banking and risk control via credit availability. Information about later default reveals prudent relationship lending. However, banks could have made better use of available information about borrowers' riskiness. These findings do not support a general verdict of bad banking but indicate room to improve lending decisions.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Applied Economics.

Volume (Year): 39 (2007)
Issue (Month): 9 ()
Pages: 1077-1089

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Handle: RePEc:taf:applec:v:39:y:2007:i:9:p:1077-1089

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Cited by:
  1. Hübler, Olaf Hübler & Menkhoff, Lukas & Suwanaporn, Chodechai, 2007. "Financial Liberalisation in Emerging Markets: How Does Bank Lending Change?," Hannover Economic Papers (HEP) dp-364, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
  2. Menkhoff, Lukas & Neuberger, Doris & Suwanaporn, Chodechai, 2006. "Collateral-based lending in emerging markets: Evidence from Thailand," Journal of Banking & Finance, Elsevier, vol. 30(1), pages 1-21, January.
  3. Gómez-González, José Eduardo & Reyes, Nidia Ruth, 2011. "The number of banking relationships and the business cycle: New evidence from Colombia," Economic Systems, Elsevier, vol. 35(3), pages 408-418, September.

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