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Factors Affecting Collateralized Borrowing by SMEs: Evidence from Emerging Markets

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  • Aysa Ipek Erdogan

Abstract

This study aims to enhance the empirical evidence on the determinants of collateralized borrowing by small and medium-sized enterprises (SMEs) by presenting new empirical evidence on emerging market countries. Using the data from World Bank Enterprise Surveys from nine emerging markets, we find that older SMEs are less likely to provide collateral for bank loans. The results also reveal that loans received by firms whose top managers are more experienced in the industry and firms with a higher percentage of material inputs and services purchased on account are less likely to be secured. SMEs in the manufacturing industry are more likely to provide collateral for bank loans than service industry firms. The likelihood that the loan is secured is higher for firms with larger loan sizes. Furthermore, our results indicate that the probability of pledging collateral is higher for SMEs that operate in countries with higher borrower-bank proximity.

Suggested Citation

  • Aysa Ipek Erdogan, 2020. "Factors Affecting Collateralized Borrowing by SMEs: Evidence from Emerging Markets," Prague Economic Papers, Prague University of Economics and Business, vol. 2020(6), pages 729-749.
  • Handle: RePEc:prg:jnlpep:v:2020:y:2020:i:6:id:759:p:729-749
    DOI: 10.18267/j.pep.759
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    More about this item

    Keywords

    Collateral; SMEs; emerging markets; SME financing; bank loans; banks;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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