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Organizational distance and use of collateral for business loans

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  • Gabriel Jiménez

    ()
    (Banco de España)

  • Vicente Salas-Fumás

    ()
    (Universidad de Zaragoza)

  • Jesús Saurina

    ()
    (Banco de España)

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    Abstract

    This paper examines the effect of organizational distance (i.e. distance between the headquarters of the bank that grants a loan and the location of the borrower) on the use of collateral for business loans by Spanish banks on the basis of the recent lender based theory of collateral [Inderst and Mueller (2007)]. We find that, for the average borrower, the use of collateral is higher for loans granted by local lenders than by distant ones. We also show that the difference in the likelihood of collateral in loans granted by local lenders, relative to distant lenders, is higher among older and larger firms and among firms with longer duration of the lender-borrower relationship, than, respectively, younger, smaller firms and shorter duration. We also find that banks use lending technologies that are different for near and for distant firms, in response to organizational diseconomies.

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    File URL: http://www.bde.es/f/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/08/Fic/dt0816e.pdf
    File Function: First version, August 2008
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    Bibliographic Info

    Paper provided by Banco de Espa�a in its series Banco de Espa�a Working Papers with number 0816.

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    Length: 33 pages
    Date of creation: Aug 2008
    Date of revision:
    Handle: RePEc:bde:wpaper:0816

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    Keywords: bank lending technologies; distance; collateral; organizational diseconomies;

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    References

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    Cited by:
    1. Pietro Alessandrini & Andrea Filippo Presbitero & Alberto Zazzaro, 2008. "Global Banking and Local Markets," Mo.Fi.R. Working Papers 4, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
    2. benvenuti, m. & casolaro, l. & del prete, s. & mistrulli, p. e., 2010. "Loan Officer Authority and Small Business Lending.Evidence from a survey," MPRA Paper 26475, University Library of Munich, Germany.

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