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Trust and the Demand for Personal Collateral in SME - Bank Relationships
The Journal of Entrepreneurial Finance
  • Andrea Moro, University of Leicester, UK
  • Mike R. Lucas, The Open University Business School, UK
  • Devendra Kodwani, The Open University Business School, UK
Previous research on relationship lending has paid very little attention to the role of trust. Trust might be ex-pected to reduce agency costs, perceived credit risk and thus the request for personal collateral. Trustworthiness is associated with three attributes of SME owner/managers’: ability, benevolence and integrity. We hypothe-sised that loan managers’ assessment of the trustworthiness of owner/managers is negatively associated with the personal collateral demanded by banks. Using the quantitative and qualitative data about 457 SMEs-bank rela-tionships in North East Italy, we tested this hypothesis. The results show that trust has a minor role in reducing the request of collateral.
Publication Date
JEL Codes
G21, M13, D82
  • Trust,
  • Relationship lending,
  • Relationship Banking,
  • SME,
  • Personal Collateral
Citation Information
Andrea Moro, Mike R. Lucas and Devendra Kodwani. "Trust and the Demand for Personal Collateral in SME - Bank Relationships" (2012) p. 57 - 79
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