Arbeitspapier
Rules versus discretion in loan rate setting
We propose a heteroscedastic regression model to identify the determinants of the dispersion in interest rates on loans granted to small and medium sized enterprises. We interpret unexplained deviations as evidence of the banks' discretionary use of market power in the loan rate setting process. Discretion in the loan-pricing process is most important, we find, if: (i) loans are small and uncollateralized; (ii) firms are small, risky and difficult to monitor; (iii) firms' owners are older, and, (iv) the banking market where the firm operates is large and highly concentrated. We also find that the weight of discretion in loan rates of small credits to opaque firms has decreased somewhat over the last fifteen years, consistent with the proliferation of information-technologies in the banking industry. Overall, our results reflect the relevance in the credit market of the costs firms face in searching information and switching lenders.
- Language
-
Englisch
- Bibliographic citation
-
Series: CESifo Working Paper ; No. 2091
- Classification
-
Wirtschaft
Banks; Depository Institutions; Micro Finance Institutions; Mortgages
Production, Pricing, and Market Structure; Size Distribution of Firms
- Subject
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Kredit
Kreditgeschäft
Preisdifferenzierung
Entscheidungstheorie
Diskrete Entscheidung
Theorie
- Event
-
Geistige Schöpfung
- (who)
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Cerqueiro, Geraldo
Degryse, Hans
Ongena, Steven
- Event
-
Veröffentlichung
- (who)
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Center for Economic Studies and ifo Institute (CESifo)
- (where)
-
Munich
- (when)
-
2007
- Handle
- Last update
-
10.03.2025, 11:42 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Cerqueiro, Geraldo
- Degryse, Hans
- Ongena, Steven
- Center for Economic Studies and ifo Institute (CESifo)
Time of origin
- 2007
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