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Collateral-Based Lending in Emerging Markets: Evidence from Thailand

Author

Listed:
  • Lukas Menkhoff

    (University of Hannover, Germany)

  • Doris Neuberger

    (University of Rostock, Germany)

  • Chodechai Suwanaporn

    (Chulalongkorn University, Thailand)

Abstract

This paper examines the role and determinants of collateral in emerging markets compared to mature ones. Analyzing a data set of 560 credit files of Thai commercial banks, we find that both the incidence and degree of collateralization are higher there than in developed markets. Thai banks use collateral primarily to reduce the higher credit risks of small and relatively young firms. Long credit relationships do not reduce collateral requirements by lowering information asymmetry. Market imperfections result from housebanks demanding higher collateral than non-housebanks, suggesting a lock-in effect for their borrowers, and from larger banks realizing higher collateral claims.

Suggested Citation

  • Lukas Menkhoff & Doris Neuberger & Chodechai Suwanaporn, 2005. "Collateral-Based Lending in Emerging Markets: Evidence from Thailand," Finance 0501008, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpfi:0501008
    Note: Type of Document - pdf; pages: 31
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    More about this item

    Keywords

    Bank lending; collateral; credit risk; relationship lending; emerging economies;
    All these keywords.

    JEL classification:

    • G - Financial Economics
    • O - Economic Development, Innovation, Technological Change, and Growth

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    This paper has been announced in the following NEP Reports:

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