Collateral and its Determinants: Evidence from Vietnam
AbstractThis paper analyses the determinants of collateral in loans granted to entrepreneurs and consumers. We use cross-sectional data on more than 39,000 bank loans raised by Vietnamese borrowers between 2006 and 2009. Our data set is unique because it contains information about the bank's assessment of the borrower's ex ante risk and the borrowers' wealth including pledged as well as unpledged assets. We find that observationally riskier borrowers, as measured by the bank through the ex ante risk score, are more likely to pledge collateral. At the same time, wealthier borrowers are more likely to pledge collateral in order to benefit from a reduction in their interest costs. We also present evidence on other determinants of collateral such as borrower-lender relationship, credit market competition, and institutions. --
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Bibliographic InfoPaper provided by Verein für Socialpolitik, Research Committee Development Economics in its series Proceedings of the German Development Economics Conference, Berlin 2011 with number 36.
Date of creation: 2011
Date of revision:
Collateral; retail lending; observed risk hypothesis; loan pricing; emerging markets;
Find related papers by JEL classification:
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-07-27 (All new papers)
- NEP-BAN-2011-07-27 (Banking)
- NEP-DEV-2011-07-27 (Development)
- NEP-MFD-2011-07-27 (Microfinance)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- 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(01), pages 87-110, March.
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