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Related Lending / Rafael La Porta, Florencio Lopez-de-Silane, Guillermo Zamarripa.
- Format:
- Book
- Author/Creator:
- La Porta, Rafael.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w8848.
- NBER working paper series no. w8848
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2002.
- Summary:
- In many countries, banks lend to firms controlled by the bank?s owners. We examine the benefits of related lending using a newly assembled dataset for Mexico. Related lending is prevalent (20% of commercial loans) and takes place on better terms than arm?s-length lending (annual interest rates are 4 percentage points lower). Related loans are 33% more likely to default and, when they do, have lower recovery rates (30% less) than unrelated ones. The evidence supports the view that rather than enhance information sharing, related lending is a manifestation of looting.
- Notes:
- Print version record
- March 2002.
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