Trust and the Demand for Personal Collateral in SME - Bank RelationshipsThe Journal of Entrepreneurial Finance
AbstractPrevious 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.
JEL CodesG21, M13, D82
- Relationship lending,
- Relationship Banking,
- Personal Collateral
Citation InformationAndrea Moro, Mike R. Lucas and Devendra Kodwani. "Trust and the Demand for Personal Collateral in SME - Bank Relationships" (2012) p. 57 - 79
Available at: http://works.bepress.com/devendra_kodwani/1/