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The Cross-Country Magnitude and Determinants of Collateral Borrowing / Ha Nguyen
World Bank Open Knowledge Repository (formerly "World Bank E-Library Publications") Available online
View online- Format:
- Book
- Government document
- Author/Creator:
- Nguyen, Ha
- Series:
- Policy research working papers.
- World Bank e-Library.
- Language:
- English
- Subjects (All):
- Access to Finance.
- Bankruptcy and Resolution of Financial Distress.
- Banks & Banking Reform.
- Collateral.
- Debt Markets.
- Emerging Markets.
- Finance and Financial Sector Development.
- Financing Constraints.
- Macroeconomics and Economic Growth.
- Local Subjects:
- Access to Finance.
- Bankruptcy and Resolution of Financial Distress.
- Banks & Banking Reform.
- Collateral.
- Debt Markets.
- Emerging Markets.
- Finance and Financial Sector Development.
- Financing Constraints.
- Macroeconomics and Economic Growth.
- Physical Description:
- 1 online resource (32 pages)
- Place of Publication:
- Washington, D.C., The World Bank, 2012
- System Details:
- data file
- Summary:
- Using the World Bank Enterprise Survey covering 6,800 firms across 43 developing countries, this paper investigates the prevalence and determinants of collateralized borrowing. It focuses on the following two aspects: (1) whether firms' loans from financial institutions require collateral (the extensive margin) and (2) the collateral value relative to the loan value (the intensive margin). On the first aspect, it finds that collateral borrowing is prevalent. On average, 73 percent of loans from financial institutions require collateral. Firms that are small or sell domestically are significantly less likely to pledge collateral. Shorter loans and loans from non-bank financial institutions are also less often associated with collateral. On the second aspect, it finds that on average the loan value is at least 72 percent of the collateral value. The only robust and significant determinants of the collateral value are the type of assets used for collateral. The analysis also checks whether countries' income and institutions affect collateralized borrowing. It finds that firms in countries with higher income and better institutions and credit information are significantly less likely to pledge collateral. These factors, however, have little impact on collateral values.
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