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.
JEL classification codes: G21, G32, O16
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.