Scientific journal paper Q2
Owner guarantees, observed and unobserved risks, and bank lending spreads
Fábio Dias Duarte (Duarte, F. D.); Ana Paula Matias Gama (Gama, A. P. M.); MA Gulamhussen (Gulamhussen, M. A.);
Journal Title
Journal of Financial Services Research
Year (definitive publication)
N/A
Language
English
Country
United States of America
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Abstract
In this paper, we examine the influence of owner guarantees on loan rates. Other studies on the influence of business collateral have used survey and credit register data to establish this link. They support it with the pre-lending information theory and post-lending incentive theory and find that the latter predominates the former. Thus, we measure observed and unobserved risks on bank lending spreads negotiated over the counter to show the co-existence of both theories. The main findings and robustness tests show that owner guarantees reduce bank lending spreads for safe but not risky firms, supporting the pre-lending information theory rather than the post-lending incentive theory. These findings underscore the role of owner guarantees in allaying the information problems the bank confronts prior to lending.
Acknowledgements
This work was supported by Fundação para a Ciência e a Tecnologia, I.P., through projects and grants: UID/ECO/04105/2020, UIDB/04630/2020, UIDB/00315/2020 (DOI:https://doi.org/10.54499/UIDB/00315/2020) and PTDC/IIM-FIN/7188/2014.
Keywords
Signaling and incentives,Banks,Firm financing,Business fluctuations
  • Economics and Business - Social Sciences
Funding Records
Funding Reference Funding Entity
ID/ECO/04105/2020 Fundação para a Ciência e a Tecnologia
PTDC/IIM-FIN/7188/2014 Fundação para a Ciência e a Tecnologia
UIDB/00315/2020 Fundação para a Ciência e a Tecnologia
IDB/04630/2020 Fundação para a Ciência e a Tecnologia
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