Collateral requirements of SMEs: The evidence from less-developed countries

Hanedar, Elmas Yaldız; Broccardo, Eleonora; Bazzana, Flavio

doi:10.1016/j.jbankfin.2013.09.019

Cited by 72 publications

(33 citation statements)

References 96 publications

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“…Ang (1992) shows that firms with concentrated ownership tend to have long-term orientations and strive for survival and reputation, therefore, less agency related conflicts. Moreover, it is difficult to enforce loan recovery if several people own the firm (Hanedar et al 2014). Hanedar et al find that sole ownership firms pledge lower collateral than of the corporations.…”

Section: Firm Characteristicsmentioning

confidence: 99%

“…Hanedar et al (2014) used liquidity risk, overdue payments and crime as proxies for borrower risk and found that these factors have a positive correlation with the presence of collateral. Jimenez et al (2006) used borrower loan defaults as observed risk proxies in the Spanish market and found that loan defaults have a positive correlation with collateral, thus supporting the observed risk hypothesis.…”

Section: Firm Characteristicsmentioning

confidence: 99%

“…Moreover, the quality of the firm is measured through the availability of international quality recognition, such as ISO certification. Availability of such certification indicates higher firm quality (Hanedar et al 2014). In this paper, we used liquidity risk, crime and ISO certification as proxies for borrower observed credit quality and expect to find a positive relationship between liquidity risk and crime with collateral and a negative relationship with ISO certification.…”

Section: Firm Characteristicsmentioning

confidence: 99%

“…To examine the effect of asset tangibility in minimizing information asymmetry, we include Manufacturing firms (1 if the firm is a manufacturing firm and 0 otherwise) (Gompers 1995). To examine the impact of agency costs in collateral requirements (Hanedar et al 2014), our model includes Ownership concentration (percentage ownership of the firm held by the largest shareholder). As discussed elsewhere, ownership concentration may have a negative effect on collateral requirements due to less agency related issues, since the owner is most likely the manager of the firm's.…”

Section: Independent Variablesmentioning

confidence: 99%

“…Quality is 1 if the firm has an internationally recognized quality certificate, and 0 otherwise. Crime is 1 if the firm has experienced any losses because of theft, robbery, vandalism or arson, and 0 otherwise (Hanedar et al 2014;Duarte et al 2017). Liquidity measures the percentage of credit sales over total sales, as more credit sales can increase the possibility of liquidity crisis (Hanedar et al 2014).…”

Section: Independent Variablesmentioning

confidence: 99%

See 4 more Smart Citations

Collateral Requirements for Sme Loans: Empirical Evidence From the Visegrad Countries

Rahman

Belás

Klieštik

et al. 2017

Journal of Business Economics and Management

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Abstract. The purpose of this paper is to examine the determinants of collateral for small and medium enterprises (SMEs) in the context of Visegrad countries: Czech Republic, Slovak Republic, Hungary and Poland. The data set for this paper was obtained from the Business Environment and Enterprise Performance Survey (BEEPS), which was conducted by the World Bank and the European Bank for Reconstruction and Development (EBRD) from 2012-2014. A binary logistic regression model with different specifications was employed to examine the effect of independent variables on the incidence of collateral. The results show that risky borrowers need to pledge collateral and the reduction of asymmetric information can lower the incidence of collateral for SMEs. Moreover, we find that female borrowers are more likely to pledge collateral than male borrowers are. The results also suggest that loans with a longer maturity are more likely to be collateralized than short-term loans. We find evidence that bank-borrower proximity can alleviate the incidence of collateral whereas bank concentration may increase collateral requirements. Policy makers may consider these results to implement policies that can promote bank competition and can lower collateral requirements for female borrowers. The paper contributes to the ongoing debate on the determinants of collateral.

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Section: Firm Characteristicsmentioning

confidence: 99%

Section: Firm Characteristicsmentioning

confidence: 99%

Section: Firm Characteristicsmentioning

confidence: 99%

Section: Independent Variablesmentioning

confidence: 99%

Section: Independent Variablesmentioning

confidence: 99%

See 3 more Smart Citations

Collateral Requirements for Sme Loans: Empirical Evidence From the Visegrad Countries

Rahman

Belás

Klieštik

et al. 2017

Journal of Business Economics and Management

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Investigating the role of banks in promoting women‐owned micro and small businesses: Empirical evidence from an emerging economy

Khan,

Jilhajj

2024

Bus Strat Dev

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Women entrepreneurs of Bangladesh face strict terms and conditions, high interest rate, and collateral requirements while requesting access to bank finance. This paper investigates the role of banks in promoting micro and small businesses owned by women in Bangladesh in terms of access to bank finance and collateral requirement. Bangladeshi women entrepreneurs were chosen as there are surge in women entrepreneurs in the nation. The study used a close‐ended questionnaire to collect data based on stratified sampling and data health was ensured using the Harman's single factor indicating no presence of common method bias. The sample consists of 60 respondents of pilot study and 150 respondents surveyed by trained enumerators resulting a final sample size of 210. The data were collected based on primary sources from the entire Bangladesh represented by the eight divisions of the country namely Dhaka, Barishal, Chittagong, Khulna, Mymensingh, Rajshahi, Rangpur, and Sylhet. The data were analyzed based on the binary logistic regression model using the IBM SPSS Statistics. Empirical results indicate that women entrepreneurs can be granted bank finance only by the private commercial banks without pledging collateralized assets according to the rules of the central bank of Bangladesh provided they offer personal guarantee, social security and group guarantee and if they default on the loans, security will be used for loan repayment, and they will be deprived of further loan facilities. The findings of the study will help add value to the current literatures and the outcomes will be helpful to the concerned parties.

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Environmental performance and bank lending: Evidence from unlisted firms

Wellalage

Kumar

2021

Bus Strat Env

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Growing public concerns about sustainability and adopting environmentally responsible practices increase risks as well as opportunities for firms and banks. It is unclear whether being environmentally responsible matters for unlisted firms, which are significant contributors to the degradation of the environment but which are not under strict scrutiny like public listed firms. Using a sample of 3915 firms from developing economies, we investigate whether the superior environmental performance of unlisted firms leads them to better loan conditions. After controlling for endogeneity and sample selection bias, we find that firms with better environmental performance received approximately 6.4% higher loans (as a ratio of total sales) and that this effect is more prominent in small and medium firms. This finding supports an information asymmetry view of agency costs. Our results, however, show that environmental performance does not affect loan duration and collateral requirement, indicating no spillover economic effect of corporate environmental performance on loan conditions. This partially supports a new perspective of legitimacy theory in relation to the 'greenwash strategy'. Overall, our study shows that strategically engaged environmental activities that are integrated with core business objectives represent an important business strategy for firms to enhance credit access.

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Collateral requirements of SMEs: The evidence from less-developed countries

Cited by 72 publications

References 96 publications

Collateral Requirements for Sme Loans: Empirical Evidence From the Visegrad Countries

Collateral Requirements for Sme Loans: Empirical Evidence From the Visegrad Countries

Investigating the role of banks in promoting women‐owned micro and small businesses: Empirical evidence from an emerging economy

Environmental performance and bank lending: Evidence from unlisted firms

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