Lending to Small Businesses

The Role of Loan Maturity in Adressing Information Problems

H. Ortiz-Molina, M.F. Penas

Research output: Working paperDiscussion paperOther research output

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Abstract

We investigate what determines the maturity of loans to small, informationally opaque businesses.We find that longer maturities are associated with collateral pledges, better financial condition, good credit history, and less informational opacity of the borrower.However, we do not find a positive association between stronger firm-creditor relationships (which can attenuate these information asymmetries) and longer maturities.The evidence suggests that creditors use shorter maturities to induce more frequent renegotiation of contract terms, thus enforcing closer monitoring of more informationally opaque and risky borrowers.Overall, our results are consistent with shorter loan maturities mitigating the consequences of borrower-lender informational asymmetries.
Original languageEnglish
Place of PublicationTilburg
PublisherFinance
Number of pages37
Volume2004-99
Publication statusPublished - 2004

Publication series

NameCentER Discussion Paper
Volume2004-99

Fingerprint

Loans
Small business
Maturity
Lending
Information asymmetry
Opacity
Monitoring
Informational asymmetry
Renegotiation
Financial condition
Credit

Keywords

  • small business
  • bank lending
  • loans
  • information

Cite this

Ortiz-Molina, H., & Penas, M. F. (2004). Lending to Small Businesses: The Role of Loan Maturity in Adressing Information Problems. (CentER Discussion Paper; Vol. 2004-99). Tilburg: Finance.
Ortiz-Molina, H. ; Penas, M.F. / Lending to Small Businesses : The Role of Loan Maturity in Adressing Information Problems. Tilburg : Finance, 2004. (CentER Discussion Paper).
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Ortiz-Molina, H & Penas, MF 2004 'Lending to Small Businesses: The Role of Loan Maturity in Adressing Information Problems' CentER Discussion Paper, vol. 2004-99, Finance, Tilburg.

Lending to Small Businesses : The Role of Loan Maturity in Adressing Information Problems. / Ortiz-Molina, H.; Penas, M.F.

Tilburg : Finance, 2004. (CentER Discussion Paper; Vol. 2004-99).

Research output: Working paperDiscussion paperOther research output

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Ortiz-Molina H, Penas MF. Lending to Small Businesses: The Role of Loan Maturity in Adressing Information Problems. Tilburg: Finance. 2004. (CentER Discussion Paper).