Are Good or Bad Borrowers Discouraged From Applying for Loans?

Han, L. ORCID: https://orcid.org/0000-0002-2778-3338, Fraser, S. and Storey, D. (2009) Are Good or Bad Borrowers Discouraged From Applying for Loans? Journal of Banking & Finance, 33. pp. 415-424. ISSN 0378-4266 doi: 10.1016/j.jbankfin.2008.08.014

Abstract/Summary

This paper takes the concept of a discouraged borrower originally formulated by Kon and Storey [Kon, Y., Storey, D.J., 2003. A theory of discouraged borrowers. Small Business Economics 21, 37–49] and examines whether discouragement is an efficient self-rationing mechanism. Using US data it finds riskier borrowers have higher probabilities of discouragement, which increase with longer financial relationships, suggesting discouragement is an efficient self-rationing mechanism. It also finds low risk borrowers are less likely to be discouraged in concentrated markets than in competitive markets and that, in concentrated markets, high risk borrowers are more likely to be discouraged the longer their financial relationships. We conclude discouragement is more efficient in concentrated, than in competitive, markets.

Item Type	Article
URI	https://reading-clone.eprints-hosting.org/id/eprint/45482
Identification Number/DOI	10.1016/j.jbankfin.2008.08.014
Refereed	Yes
Divisions	Henley Business School > Business Informatics, Systems and Accounting
Publisher	Elsevier
Download/View statistics	View download statistics for this item