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Collateral Requirements of SMEs:The Evidence from Less–Developed Countries

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  • Elmas Yaldiz Hanedar
  • Eleonora Broccardo
  • Flavio Bazzana

Abstract

The main objective of this paper is to investigate the determinants of collateral requirements on loans that are extended to small and medium enterprises (SMEs) in less–developed countries. Our primary data source is the Business Environment and Enterprise Performance Survey (BEEPS) results from Eastern European and Central Asian countries. We observe that country–specific variables are more important than firm–specific variables for determining both the presence of collateral in loan contracts and the collateral to loan value ratios of these contracts. The strongest evidence in our paper addresses the important role that information sharing among lenders plays in the reduction of collateral requirements.

Suggested Citation

  • Elmas Yaldiz Hanedar & Eleonora Broccardo & Flavio Bazzana, 2012. "Collateral Requirements of SMEs:The Evidence from Less–Developed Countries," Centro Studi di Banca e Finanza (CEFIN) (Center for Studies in Banking and Finance) 0034, Universita di Modena e Reggio Emilia, Dipartimento di Economia "Marco Biagi".
    • Handle: RePEc:mod:wcefin:0034
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    More about this item

    Keywords

    collateral; SMEs; loan conditions; two–part models;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • 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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