The Effects of Collateral on SME Performance in Japan
This paper examines how collateral and personal guarantees affect firms' ex-post performance employing the propensity score matching estimation approach. Based on a unique firm-level panel data set of more than 500 small-and-medium-sized borrower firms in Japan, we find the following. (1) The increase in profitability and reduction in riskiness of borrowers that provide collateral to lenders are more sizeable than of borrowers that do not. (2) On the other hand, the lending attitude and monitoring frequency of borrowers' main bank do not change significantly at the time of collateral being pledged. (3) The increase in profitability of collateralized borrowers is driven by cost reductions rather than by sales growth. These findings are consistent with the hypothesis that by providing collateral, borrowers curb their own incentives for moral hazard in order to further enhance their creditworthiness.
|Date of creation:||Sep 2008|
|Date of revision:|
|Note:||This draft: September 2008; Initial draft: February 2008|
|Contact details of provider:|| Postal: |
Web page: http://cis.ier.hit-u.ac.jp/
More information through EDIRC
References listed on IDEAS
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.:
- Inderst, Roman & Mueller, Holger M, 2006.
"A Lender-Based Theory of Collateral,"
CEPR Discussion Papers
5695, C.E.P.R. Discussion Papers.
- Jimenez, Gabriel & Salas, Vicente & Saurina, Jesus, 2006. "Determinants of collateral," Journal of Financial Economics, Elsevier, vol. 81(2), pages 255-281, August.
- Longhofer, Stanley D. & Santos, Joao A. C., 2000.
"The Importance of Bank Seniority for Relationship Lending,"
Journal of Financial Intermediation,
Elsevier, vol. 9(1), pages 57-89, January.
- Stanley D. Longhofer & João A.C. Santos, 1998. "The importance of bank seniority for relationship lending," Working Paper 9808, Federal Reserve Bank of Cleveland.
- João A. C. Santos & Stanley D. Longhofer, 1998. "The importance of bank seniority for relationship lending," BIS Working Papers 58, Bank for International Settlements.
- Stanley D. Longhofer & João A. C. Santos, 1999. "The importance of bank seniority for relationship lending," Proceedings 620, Federal Reserve Bank of Chicago.
- Berger, Allen N. & Udell, Gregory F., 1990.
"Collateral, loan quality and bank risk,"
Journal of Monetary Economics,
Elsevier, vol. 25(1), pages 21-42, January.
- Sascha O. Becker & Andrea Ichino, 2002. "Estimation of average treatment effects based on propensity scores," Stata Journal, StataCorp LP, vol. 2(4), pages 358-377, November.
- Marco Caliendo & Sabine Kopeinig, 2008.
"Some Practical Guidance For The Implementation Of Propensity Score Matching,"
Journal of Economic Surveys,
Wiley Blackwell, vol. 22(1), pages 31-72, 02.
- Caliendo, Marco & Kopeinig, Sabine, 2005. "Some Practical Guidance for the Implementation of Propensity Score Matching," IZA Discussion Papers 1588, Institute for the Study of Labor (IZA).
- Marco Caliendo & Sabine Kopeinig, 2005. "Some Practical Guidance for the Implementation of Propensity Score Matching," Discussion Papers of DIW Berlin 485, DIW Berlin, German Institute for Economic Research.
- Brick, Ivan E. & Palia, Darius, 2007. "Evidence of jointness in the terms of relationship lending," Journal of Financial Intermediation, Elsevier, vol. 16(3), pages 452-476, July.
- Bester, Helmut, 1985. "Screening vs. Rationing in Credit Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 75(4), pages 850-55, September.
- Gabriel Jiménez & Jesús Saurina, 2004. "Collateral, type of lender and relationship banking as determinants of credit risk," Banco de Espa�a Working Papers 0414, Banco de Espa�a.
- Besanko, David & Thakor, Anjan V, 1987. "Collateral and Rationing: Sorting Equilibria in Monopolistic and Competitive Credit Markets," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 28(3), pages 671-89, October.
- Berger, Allen N & Udell, Gregory F, 1995. "Relationship Lending and Lines of Credit in Small Firm Finance," The Journal of Business, University of Chicago Press, vol. 68(3), pages 351-81, July.
- Boot, Arnoud W A & Thakor, Anjan V & Udell, Gregory F, 1991. "Secured Lending and Default Risk: Equilibrium Analysis, Policy Implications and Empirical Results," Economic Journal, Royal Economic Society, vol. 101(406), pages 458-72, May.
- Manove, Michael & Padilla, A Jorge & Pagano, Marco, 2001. "Collateral versus Project Screening: A Model of Lazy Banks," RAND Journal of Economics, The RAND Corporation, vol. 32(4), pages 726-44, Winter.
- Ono, Arito & Uesugi, Iichiro, 2008. "The Role of Collateral and Personal Guarantees in Relationship Lending: Evidence from Japan's SME Loan Market," PIE/CIS Discussion Paper 371, Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University.
- 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.
- Rajan, Raghuram & Winton, Andrew, 1995. " Covenants and Collateral as Incentives to Monitor," Journal of Finance, American Finance Association, vol. 50(4), pages 1113-46, September.
- Arito Ono & Iichiro Uesugi, 2009. "Role of Collateral and Personal Guarantees in Relationship Lending: Evidence from Japan's SME Loan Market," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 41(5), pages 935-960, 08.
When requesting a correction, please mention this item's handle: RePEc:hit:piecis:401. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Digital Resources Section, Hitotsubashi University Library)The email address of this maintainer does not seem to be valid anymore. Please ask Digital Resources Section, Hitotsubashi University Library to update the entry or send us the correct address
If references are entirely missing, you can add them using this form.