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Collateral and Adverse Selection in Transition Countries

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  • Laurent Weill
  • Christophe J. Godlewski

Abstract

This paper tackles the question of knowing whether collateral helps to solve adverse selection problems in transition countries. We use a unique data set of about four hundred bank loans in sixteen transition countries. Our findings support the view of a positive link between the presence of collateral and the risk premium, which accords 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, 2009. "Collateral and Adverse Selection in Transition Countries," Eastern European Economics, Taylor & Francis Journals, vol. 47(1), pages 29-40, January.
  • Handle: RePEc:mes:eaeuec:v:47:y:2009:i:1:p:29-40
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    6. Jimenez, Gabriel & Saurina, Jesus, 2004. "Collateral, type of lender and relationship banking as determinants of credit risk," Journal of Banking & Finance, Elsevier, vol. 28(9), pages 2191-2212, September.
    7. Andrzej Bratkowski & Irena Grosfeld & Jacek Rostowski, 2000. "Investment and Finance in "de novo" private firms: Empirical Results from the Czech Republic, Hungary and Poland," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 8(1), pages 101-116, March.
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    15. Régis Blazy & Laurent Weill, 2013. "Why do banks ask for collateral in SME lending?," Applied Financial Economics, Taylor & Francis Journals, vol. 23(13), pages 1109-1122, July.
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    Cited by:

    1. Hall, Thomas W., 2012. "The collateral channel: Evidence on leverage and asset tangibility," Journal of Corporate Finance, Elsevier, vol. 18(3), pages 570-583.
    2. repec:onb:oenbwp:y:2010:i:1:b:1 is not listed on IDEAS

    More about this item

    JEL classification:

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

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