Organizational Distance and Use of Collateral for Business Loans

33 Pages Posted: 26 Aug 2008

See all articles by Jesus Saurina Salas

Jesus Saurina Salas

Banco de España

Vicente Salas-Fumás

University of Zaragoza - Department of Business Administration and Organization

Gabriel Jiménez

Banco de España

Date Written: August 18, 2008

Abstract

This paper examines the effect of organizational distance (i.e. distance between the headquarters of the bank that grants a loan and the location of the borrower) on the use of collateral for business loans by Spanish banks on the basis of the recent lender based theory of collateral [Inderst and Mueller (2007)]. We find that, for the average borrower, the use of collateral is higher for loans granted by local lenders than by distant ones. We also show that the difference in the likelihood of collateral in loans granted by local lenders, relative to distant lenders, is higher among older and larger firms and among firms with longer duration of the lender-borrower relationship, than, respectively, younger, smaller firms and shorter duration. We also find that banks use lending technologies that are different for near and for distant firms, in response to organizational diseconomies.

Keywords: G21, L22

JEL Classification: bank lending technologies, distance, collateral, organizational diseconomies

Suggested Citation

Saurina Salas, Jesus and Salas-Fumás, Vicente and Jimenez, Gabriel, Organizational Distance and Use of Collateral for Business Loans (August 18, 2008). Available at SSRN: https://ssrn.com/abstract=1233582 or http://dx.doi.org/10.2139/ssrn.1233582

Jesus Saurina Salas (Contact Author)

Banco de España ( email )

Madrid 28014
Spain

Vicente Salas-Fumás

University of Zaragoza - Department of Business Administration and Organization ( email )

Dr. Cerrada 1
5005 Zaragoza
Spain
+34 976 761803 (Phone)

Gabriel Jimenez

Banco de España ( email )

Alcala 50
Madrid 28014
Spain

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