Organizational distance and use of collateral for business loans

By Gabriel Jiménez, V. Salas, Jesús Saurina. 2009

130 citations recorded by the source corpus.

This paper examines the effect of organizational distance (i.e. distance between the headquarters of the bank that grants a loan and the location of the borrower) on the use of collateral for business loans by Spanish banks on the basis of the recent lender based theory of collateral [Inderst and Mueller (2007)]. We find that, for the average borrower, the use of collateral is higher for loans granted by local lenders than by distant ones. We also show that the difference in the likelihood of collateral in loans granted by local lenders, relative to distant lenders, is higher among older and larger firms and among firms with longer duration of the lender-borrower relationship, than, respectively, younger, smaller firms and shorter duration. We also find that banks use lending technologies that are different for near and for distant firms, in response to organizational diseconomies.

Subfields: Accounting, Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/2542bae8b825c4389deacbc3ef2b4744e6469d2c

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Citations in the corpus

Bank size, lending technologies, and small business finance (2011, background): “technologies when lending at different distances (Jiménez et al., 2009).”
Collateral and its Substitutes in Emerging Markets' Lending (2012, unknown): “Accordingly, these so-called borrower-based theories (Jiménez et al., 2009) predict that the use of collateral varies across loans according to the characteristics of borrowers, loans, and bank-borrower relationships, which affect information asymmetries between both parties about the credit risk of”