IDEAS home Printed from https://ideas.repec.org/a/wly/mgtdec/v24y2003i6-7p483-501.html
   My bibliography  Save this article

Determinants of the collateralization of credit by small firms

Author

Listed:
  • Heather M. Hulburt

    (Department of Finance, College of Business and Economics, West Virginia University, Morgantown, WV 26506-6025, USA)

  • Frederick C. Scherr

    (Department of Finance, College of Business and Economics, West Virginia University, Morgantown, WV 26506-6025, USA)

Abstract

This study presents results of an empirical investigation of debt collateralization using samples of small firms. We examine the fraction of debt that is collateralized and find substantial support for firm size, firm age, and collateral quality as determinants of collateralization. Our results regarding firm size and age are different from prior research and may stem from basic financial differences between small and large firms. We find mixed support for growth opportunities and taxation and little support for default probability, regulation, and form of legal organization as determinants of collateralization. Copyright © 2003 John Wiley & Sons, Ltd.

Suggested Citation

  • 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.
    • Handle: RePEc:wly:mgtdec:v:24:y:2003:i:6-7:p:483-501
    DOI: 10.1002/mde.1071
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1002/mde.1071
    File Function: Link to full text; subscription required
    Download Restriction: no
    File URL: https://libkey.io/10.1002/mde.1071?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Stohs, Mark Hoven & Mauer, David C, 1996. "The Determinants of Corporate Debt Maturity Structure," The Journal of Business, University of Chicago Press, vol. 69(3), pages 279-312, July.
    2. Elijah Brewer & Hesna Genay & William E. Jackson & Paula R. Worthington, 1996. "How are small firms financed? Evidence from small business investment companies," Economic Perspectives, Federal Reserve Bank of Chicago, vol. 20(Nov), pages 2-18.
    3. repec:cep:stitep:/1990/217 is not listed on IDEAS
    4. Sheng-Syan Chen & Gillian H. H. Yeo & Kim Wai Ho, 1998. "Further Evidence on the Determinants of Secured versus Unsecured Loans," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 25(3&4), pages 371-385.
    5. Oliver Hart & John Moore, 1990. "A Theory of Corporate Financial Structure Based on the Seniority of Claims," STICERD - Theoretical Economics Paper Series 217, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
    6. Chan, Yuk-Shee & Thakor, Anjan V, 1987. "Collateral and Competitive Equilibria with Moral Hazard and Private Information," Journal of Finance, American Finance Association, vol. 42(2), pages 345-363, June.
    7. Dennis, Steven & Nandy, Debarshi & Sharpe, Lan G., 2000. "The Determinants of Contract Terms in Bank Revolving Credit Agreements," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 35(1), pages 87-110, March.
    8. Leeth, John D. & Scott, Jonathan A., 1989. "The Incidence of Secured Debt: Evidence from the Small Business Community," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 24(3), pages 379-394, September.
    9. Edward I. Altman, 1968. "Financial Ratios, Discriminant Analysis And The Prediction Of Corporate Bankruptcy," Journal of Finance, American Finance Association, vol. 23(4), pages 589-609, September.
    10. Kim, Chang-Soo & Mauer, David C, 1997. "Securityholder Taxes, Corporate Capital Structures and the Priority Structures of Debt," The Financial Review, Eastern Finance Association, vol. 32(3), pages 609-634, August.
    11. Rajan, Raghuram & Winton, Andrew, 1995. "Covenants and Collateral as Incentives to Monitor," Journal of Finance, American Finance Association, vol. 50(4), pages 1113-1146, September.
    12. Edward I. Altman, 1968. "The Prediction Of Corporate Bankruptcy: A Discriminant Analysis," Journal of Finance, American Finance Association, vol. 23(1), pages 193-194, March.
    13. Petersen, Mitchell A & Rajan, Raghuram G, 1994. "The Benefits of Lending Relationships: Evidence from Small Business Data," Journal of Finance, American Finance Association, vol. 49(1), pages 3-37, March.
    14. Barclay, Michael J & Smith, Clifford W, Jr, 1995. "The Maturity Structure of Corporate Debt," Journal of Finance, American Finance Association, vol. 50(2), pages 609-631, June.
    15. Sheng‐Syan Chen & Gillian H. H. Yeo & Kim Wai Ho, 1998. "Further Evidence on the Determinants of Secured versus Unsecured Loans," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 25(3‐4), pages 371-385, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Metzger, Georg, 2007. "On the Role of Entrepreneurial Experience for Start-up Financing: An Empirical Investigation for Germany," ZEW Discussion Papers 07-047, ZEW - Leibniz Centre for European Economic Research.
    2. Régis Blazy & Laurent Weill, 2006. "Why Do Banks Ask for Collateral and Which Ones?," LSF Research Working Paper Series 06-07, Luxembourg School of Finance, University of Luxembourg.
    3. An, Can & Pan, Xiaofei & Tian, Gary Gang, 2014. "Ownership structure and collateral requirements: Evidence from China's listed firms," International Review of Financial Analysis, Elsevier, vol. 36(C), pages 168-178.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hernán Ortiz-Molina & María Penas, 2008. "Lending to small businesses: the role of loan maturity in addressing information problems," Small Business Economics, Springer, vol. 30(4), pages 361-383, April.
    2. Alex Petkevich & Andrew Prevost, 2018. "Managerial ability, information quality, and the design and pricing of corporate debt," Review of Quantitative Finance and Accounting, Springer, vol. 51(4), pages 1033-1069, November.
    3. Maria do Rosario Correia & Scott C. Linn & Andrew Marshall, 2004. "An Empirical Investigation of Debt Contract Design: The Determinants of the Choice of Debt Terms in Eurobond Issues," FEP Working Papers 148, Universidade do Porto, Faculdade de Economia do Porto.
    4. Graham, John R. & Li, Si & Qiu, Jiaping, 2008. "Corporate misreporting and bank loan contracting," Journal of Financial Economics, Elsevier, vol. 89(1), pages 44-61, July.
    5. Orman, Cüneyt & Bülent, Köksal, 2015. "Structure of Debt Maturity across the Firm Type Spectrum," MPRA Paper 64860, University Library of Munich, Germany.
    6. Shang, Chenguang, 2021. "Dare to play with fire? Managerial ability and the use of short-term debt," Journal of Corporate Finance, Elsevier, vol. 70(C).
    7. Cuneyt Orman & Bulent Koksal, 2015. "Structure of Debt Maturity across Firm Types," Working Papers 1521, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
    8. Inderst, Roman & Mueller, Holger M., 2007. "A lender-based theory of collateral," Journal of Financial Economics, Elsevier, vol. 84(3), pages 826-859, June.
    9. Shao-Chi Chang & Sheng-Syan Chen & Ailing Hsing & Chia Huang, 2007. "Investment opportunities, free cash flow, and stock valuation effects of secured debt offerings," Review of Quantitative Finance and Accounting, Springer, vol. 28(2), pages 123-145, February.
    10. Pedro J. García‐Teruel & Pedro Martínez‐Solano & Juan Pedro Sánchez‐Ballesta, 2009. "Accruals quality and corporate cash holdings," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 49(1), pages 95-115, March.
    11. Ben-Nasr, Hamdi & Boubaker, Sabri & Rouatbi, Wael, 2015. "Ownership structure, control contestability, and corporate debt maturity," Journal of Corporate Finance, Elsevier, vol. 35(C), pages 265-285.
    12. Esho, Neil & Lam, Yung & Sharpe, Ian G., 2002. "Are maturity and debt type decisions interrelated? Evidence from Australian firms in international capital markets," Pacific-Basin Finance Journal, Elsevier, vol. 10(5), pages 549-569, November.
    13. Nataliya Fedorenko & Dorothea Schäfer & Oleksandr Talavera, 2007. "The Effects of the Bank-Internal Ratings on the Loan Maturity," Discussion Papers of DIW Berlin 704, DIW Berlin, German Institute for Economic Research.
    14. Allen N. Berger & Tanakorn Makaew & Raluca Roman, 2015. "Did bank borrowers benefit from the TARP program : the effects of TARP on loan contract terms," Research Working Paper RWP 15-11, Federal Reserve Bank of Kansas City.
    15. Gao, Ning & Hua, Chen & Khurshed, Arif, 2021. "Loan price in mergers and acquisitions," Journal of Corporate Finance, Elsevier, vol. 67(C).
    16. An, Can & Pan, Xiaofei & Tian, Gary Gang, 2014. "Ownership structure and collateral requirements: Evidence from China's listed firms," International Review of Financial Analysis, Elsevier, vol. 36(C), pages 168-178.
    17. Orman, Cüneyt & Köksal, Bülent, 2017. "Debt maturity across firm types: Evidence from a major developing economy," Emerging Markets Review, Elsevier, vol. 30(C), pages 169-199.
    18. Massimo Omiccioli, 2005. "Trade Credit as Collateral," Temi di discussione (Economic working papers) 553, Bank of Italy, Economic Research and International Relations Area.
    19. Lin, Chen & Ma, Yue & Malatesta, Paul & Xuan, Yuhai, 2013. "Corporate ownership structure and the choice between bank debt and public debt," Journal of Financial Economics, Elsevier, vol. 109(2), pages 517-534.
    20. Kashefi Pour, Eilnaz & Lasfer, Meziane, 2019. "Taxes, governance, and debt maturity structure: International evidence," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 58(C), pages 136-161.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:mgtdec:v:24:y:2003:i:6-7:p:483-501. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www3.interscience.wiley.com/cgi-bin/jhome/7976 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.