Bank Interest Margins and Business Start-Up Collateral: Testing for Convexity

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dc.contributor.authorBurke, Andrew
dc.contributor.authorHanley, Aoife
dc.date.accessioned2008-11-18T15:25:37Z
dc.date.available2008-11-18T15:25:37Z
dc.date.issued2006-07
dc.description.abstractThe paper investigates the relationship between bank interest rate margins and collateral for loans issued to new ventures. The analysis finds a convex U-shaped relationship. The results indicate that while provision of collateral initially reduces bank exposure to risk (through security, more optimal levels of capital and lower moral hazard among entrepreneurs) that beyond a point its association with higher wealth gives rise to greater risk taking propensity among entrepreneurs and ultimately higher interest rates. This indicates that banks’ pricing policy may even help level the competitive playing field somewhat between ventures launched by higher and moderately lower wealth entrepreneurs.en_UK
dc.identifier.citationScottish Journal of Political Economy (2006) Vol 53 No 3en_UK
dc.identifier.urihttp://hdl.handle.net/1826/3010
dc.publisherBlackwell Publishingen_UK
dc.subjectasymmetric informationen_UK
dc.subjectBank Lendingen_UK
dc.subjectCrediten_UK
dc.subjectCredit Constraintsen_UK
dc.titleBank Interest Margins and Business Start-Up Collateral: Testing for Convexityen_UK
dc.typeArticleen_UK

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