Components Of Credit Rationing

Beyhaghi, Mehdi; Firoozi, Fathali; Jalilvand, Abolhassan; Samarbakhsh, Laleh

doi:10.2139/ssrn.3478832

Cited by 4 publications

(3 citation statements)

References 28 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…While their results can still be consistent with the theoretical model developed in the section "A Theoretical Framework" of this entry in terms of the relation between credit supply and intertest rate behavior, the conceptual distinction of credit rationing by banks from credit-supply tightening in market appears ambiguous in Berger et al (2018). More recently, employing microlevel data on small-and medium-sized enterprises collected by the European Central Bank over the period 2009-2019, Beyhaghi et al (2020 further demonstrates not only that the equilibrium credit rationing can exist even in the presence of contract heterogeneity but also that rationing by the size rather than number of loans is most likely rationing regime in the post-financial crisis era. Vector-Error Correction Model (1997-2010 This section is intended to examine an extended sample period of US banking from 1997 to 2010 that covers two most recent economic recessions (the early 2000s recession from March 2001 to December 2001 and the Great Recession from December 2007 to June 2009).…”

Section: Some Empirical Literature On Credit Rationingsupporting

confidence: 72%

More on Equilibrium Credit Rationing and Interest Rates: A Theory with New Evidence

2021

Encyclopedia of Finance

View full text Add to dashboard Cite

In contrast to conventional understanding, an integrated theory of equilibrium credit rationing that allows restrictions on loan size as well as loan denials reveals a positive relationship between credit availability and interest rates when rationing by loan size (Gray, J. A. and Y. Wu, Journal of Macroeconomics 17: 405-420, 1995). This entry uses the US bank lending practices from 1997 to 2010 as a quasi-natural experiment to test the interest rate hypothesis under loan-size rationing. Based on the vector error correction analysis of commercial and industrial loans made by the US domestic banks to large and middle-market firms, there is a cointegrating relation that sufficient tightness of credit market conditions (either an average loan size less than $888,880 or a net percentage of banks tightening loan standards greater than À11%) rescues a positive relationship between loan sizes and loan rates. The net percentage of tightening banks plays a pivotal role in interacting with the size of loans and the demand for loans to maintain such a long-run equilibrium relationship.

show abstract

Section: Some Empirical Literature On Credit Rationingsupporting

confidence: 72%

More on Equilibrium Credit Rationing and Interest Rates: A Theory with New Evidence

2021

Encyclopedia of Finance

View full text Add to dashboard Cite

show abstract

“…We also contribute to the literature on credit rationing. Recent literature has decomposed credit rationing in three forms that can exist in the presence of contract heterogeneity (Beyhaghi et al 2020): (i) self-imposed rationing, which typically considers discouraged borrowers, as they did not apply for fear of being rejected; (ii) market-tightness rationing, which relates to borrowers who applied and were only partially granted. Under this type of rationing, lenders can limit the size of loan per applicant and only partially grant the amount of loan applied for; and (iii) low-type rationing, relating to borrowers who applied and were rejected.…”

Section: Introductionmentioning

confidence: 99%

Access to Credit in a Market Downturn

et al. 2022

View full text Add to dashboard Cite

Using a unique proprietary dataset from a large European commercial bank containing granular loan-level information on credit lines to mid-corporate firms, we investigate the bank’s decisions to allow firms to retain existing credit at a time of acute financial instability. Our results highlight the importance of bank-firm relationships during crisis times. Existing borrowers who actively used their credit lines were not rationed, unless they posed an increased credit risk. We do not find evidence of evergreening practices.

show abstract

“…From the credit supply perspective, the primary theoretical basis of credit constraints is credit rationing theory [ 28 ]. Under the condition of fixed interest rates, facing adverse selection and moral hazard caused by information asymmetry [ 29 , 30 ], banks are forced to adopt some non-interest-rate loan conditions, such as handling fees, transportation fees, and time involvement [ 31 ].…”

Section: Theoretical Frameworkmentioning

confidence: 99%

Impact of Credit Constraints from Formal Financial Institutions on Rural Residents’ Health in China

2020

View full text Add to dashboard Cite

This is the first study in China that looks at the impact of credit constraints from formal financial institutions on Chinese rural residents’ health. We use the Chinese Household Income Project (CHIP) data collected by the Annual Household Survey Office of Integration of Urban and Rural in the National Bureau of Statistics in 2014. We measure rural residents’ health status with self-rated health assessment and the number of sick days in 2013. The results obtained from using the ordered probit model show that, in general, credit constraints from formal financial institutions significantly and negatively affect the self-rated health of Chinese rural residents. When an endogeneity issue is addressed using the instrumental variable (IV) approach, this paper’s results are still robust. The results also show that the impact of credit constraints from formal financial institutions on rural residents’ self-rated health is significant in male, female, married, and unmarried sub-groups. Further, we find that credit constraints from formal financial institutions impact rural residents’ health through income and economic vulnerability. The findings have implications for preventing rural residents from falling into a health trap due to credit constraints from formal financial institutions.

show abstract

Components Of Credit Rationing

Cited by 4 publications

References 28 publications

More on Equilibrium Credit Rationing and Interest Rates: A Theory with New Evidence

More on Equilibrium Credit Rationing and Interest Rates: A Theory with New Evidence

Access to Credit in a Market Downturn

Impact of Credit Constraints from Formal Financial Institutions on Rural Residents’ Health in China

Contact Info

Product

Resources

About