TY  - UNPD
A1  - Inderst, Roman
A1  - Müller, Holger M.
T1  - A lender-based theory of collateral
T2  - Working paper series / Institute for Monetary and Financial Stability ; 6
N2  - We consider an imperfectly competitive loan market in which a local relationship lender has an information advantage vis-à-vis distant transaction lenders. Competitive pressure from the transaction lenders prevents the local lender from extracting the full surplus from projects, so that she inefficiently rejects marginally profitable projects. Collateral mitigates the inefficiency by increasing the local lender’s payoff from precisely those marginal projects that she inefficiently rejects. The model predicts that, controlling for observable borrower risk, collateralized loans are more likely to default ex post, which is consistent with the empirical evidence. The model also predicts that borrowers for whom local lenders have a relatively smaller information advantage face higher collateral requirements, and that technological innovations that narrow the information advantage of local lenders, such as small business credit scoring, lead to a greater use of collateral in lending relationships. JEL classification: D82; G21 Keywords: Collateral; Soft infomation; Loan market competition; Relationship lending
T3  - Working paper series / Institute for Monetary and Financial Stability - 6 
KW  - Collateral
KW  - Soft infomation
KW  - Loan market competition
KW  - Relationship lending
KW  - Kreditsicherung
KW  - Bankkredit
Y1  - 2006
UR  - http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/7020
UR  - https://nbn-resolving.org/urn:nbn:de:hebis:30-70369
UR  - http://www.imfs-frankfurt.de/fileadmin/user_upload/pdf/Working%20Paper_2006-06.pdf
N1  - Published in: Journal of Financial Economics, 2007, vol. 84, issue 3, pp. 826-859
ER  -