Does being your bank’s neighbor matter?

Knyazeva, Anzhela; Knyazeva, Diana

doi:10.1016/j.jbankfin.2011.11.011

Cited by 101 publications

(72 citation statements)

References 60 publications

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“…Hence, our result supports the idea that manufacturing firms can show greater information trans-parency than firms with fewer tangible assets. It could be the fact that asset tangibility can increase bank efficiency in evaluating the credit risk of firms, making it easier for banks to recover loans by liquidating tangible assets (Gompers 1995;Knyazeva, A., Knyazeva, D. 2012). Thus, banks ask for lower collateral from the firms those possess a significant amount of tangible assets.…”

Section: Empirical Results and Discussionmentioning

confidence: 99%

“…In terms of firm size it is argued that the large firms can demonstrate a consistent past business history, thus making it easier for banks to evaluate their credit quality (Knyazeva, A., Knyazeva, D. 2012). Hence, increased information transparency can lower the incidence of collateral.…”

Section: Firm Characteristicsmentioning

confidence: 99%

“…A. Knyazeva and D. Knyazeva (2012) find that firms with asset tangibility receive loans with lower interest rates; they argue that asset tangibility signals easy loan recovery in the event of default. In this regard, we may argue that as manufacturing firms have more tangible assets than other business types, they may pledge lower collateral due to greater information transparency.…”

Section: Firm Characteristicsmentioning

confidence: 99%

“…Additionally, longer periods may induce borrowers to shift from less risky to high-risk projects (Jensen, Meckling 1976). Shorter loan maturity can control borrowers' risk shifting behaviour by minimizing the moral hazard problem (Knyazeva, A., Knyazeva, D. 2012).…”

Section: Loan Characteristicsmentioning

confidence: 99%

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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: Empirical Results and Discussionmentioning

confidence: 99%

Section: Firm Characteristicsmentioning

confidence: 99%

Section: Firm Characteristicsmentioning

confidence: 99%

Section: Loan Characteristicsmentioning

confidence: 99%

See 2 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

View full text Add to dashboard Cite

show abstract

“…For example, banks located farther away from borrowers have higher spreads relative to closer competitors (Knyazeva and Knyazeva 2012). Others have found that the closer the distance between firm and its branch office, the more likely the bank is to offer credit, although at a greater charge (Agarwal and Hauswald 2010).…”

mentioning

confidence: 99%

The Impact of Local Knowledge on Banking

Bird

Knopf

2014

J Financ Serv Res

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We use firm-level data to study how local knowledge impacts the wage and profitability of commercial banks. Using a novel regulatory and competitive environment as a natural experiment, we find that restrictions on the mobility of local knowledge negatively impact the incidence of new bank charters. Also consistent with expected theory, we also find no impact on banks formed through mergers or acquisition where the acquiring bank can simply purchase the local knowledge available. We also find that restrictions on the mobility of local knowledge decrease labor expenses. This supports the hypothesis that such mobility restrictions enable employers to extract rents from workers who lack bargaining power arising from a potential job change to a local rival. We also find that increases in labor restrictions are positively correlated with profitability, benefiting established banks because it restricts competitive with potential new banks that could potentially exploit local knowledge more effectively.

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Domestic lead arranger certification and the pricing of project finance loans

Ahiabor

James

2018

Int. J Fin Econ

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Using a sample of 1,270 project finance syndicated loan tranches arranged from 1998 to 2011 and worth over $300 billion, we estimate the causal impact of certification by domestic lead arrangers on the pricing of project finance loans in emerging markets. We hypothesize that, on average, domestic arrangers are better able to structure and screen project finance deals, credibly communicate the true value of a project and its underlying network of contracts, and monitor the loan contract compared with foreign arrangers. If so, all things being equal, domestic arranger certification should result in lower loan spreads compared with foreign arranger certification. Our results support this hypothesis. After controlling for project and loan characteristics and the potential endogeneity of the lead arranger's selection, we find that certification by domestic arrangers causes a significant reduction in loan spreads across different industrial categories and geographic locations of projects. This finding demonstrates the economic value of domestic arranger certification in project finance lending. Our results suggest that, in the presence of information asymmetry between project sponsors and participant lenders in the syndicate, certification by domestic arrangers offers a superior mechanism to minimize search, information, and monitoring costs.

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Does being your bank’s neighbor matter?

Cited by 101 publications

References 60 publications

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

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

The Impact of Local Knowledge on Banking

Domestic lead arranger certification and the pricing of project finance loans

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