search query: @indexterm Credit markets / total: 99
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| Author: | Coco, G. |
| Title: | Collateral, heterogeneity in risk attitude and the credit market equilibrium |
| Journal: | European Economic Review
1999 : MAR, VOL. 43:3, p. 559-574 |
| Index terms: | CREDIT MARKETS CREDIT RATIONING RISK EQUILIBRIUM ANALYSIS MODELS |
| Language: | eng |
| Abstract: | The paper examines the argument that the availability of collateral rules out credit rationing. A model of the credit market with ex-ante asymmetric information and heterogeneous entrepreneurs' attitudes toward risk is set up. It is shown that, due to the interplay btw. project choice and entrepreneurs' preferences, using collateral as a signal to screen safer projects may prove impossible. Contrary to previous theoretical research and consistently with conventional wisdom and systematic evidence, the use of collateral is never negatively correlated with project risk. |
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