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Collateral and Adverse Selection in Transition Countries

Author

Listed:
  • Laurent Weill

    (Laboratoire de Recherche en Gestion et Economie, Institut d'Etudes Politiques, Strasbourg)

  • Christophe J. GODLEWSKI

    (Laboratoire de Recherche en Gestion et Economie, Université Louis Pasteur)

Abstract

This paper tackles the question of knowing whether collateral helps solve adverse selection problems in transition countries. We use a unique dataset of about 400 bank loans from 16 transition countries. Our findings support the view of a positive link between the presence of collateral and the risk premium, which is in accordance with the observed-risk hypothesis. This suggests that collateral does not mitigate adverse selection problems in transition countries.

Suggested Citation

  • Laurent Weill & Christophe J. GODLEWSKI, 2008. "Collateral and Adverse Selection in Transition Countries," Working Papers of LaRGE Research Center 2008-10, Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg.
    • Handle: RePEc:lar:wpaper:2008-10
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    2. Zaineb Hlioui & Mohamed Gabsi & Abdelwahed Omri, 2022. "Informal Competition Effect on SMEs’ Innovation: Do Credit Constraints Matter? Evidence from Eastern European Countries," Sustainability, MDPI, vol. 14(21), pages 1-23, October.
    3. 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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    More about this item

    Keywords

    Bank; collateral; transition economies.;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • P20 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - General

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