Are Loans Cheaper When Tomorrow Seems Further?

26 Pages Posted: 28 Mar 2019

See all articles by Christophe J. Godlewski

Christophe J. Godlewski

University of Strasbourg - Faculty of Law and Business; EM Strasbourg Business School; LaRGE Research Center

Laurent Weill

University of Strasbourg - LaRGE Research Center (Laboratoire de Recherche en Gestion et Economie)

Date Written: March 5, 2019

Abstract

This paper studies how future tense marking affects the terms of bank loans. We predict that languages that grammatically mark the future affect speakers’ intertemporal preferences and thereby reduce the perception of the risks associated with loan issuance. We test this hypothesis on a sample of 2,601 bank loans from 20 European countries. We observe that the use of a language with future tense marking is associated with lower loan spreads and lower collateral use in loan contracts. The results corroborate Chen (American Economic Review, 2013)’s hypothesis that future tense marking makes the future more distant than the present. They suggest that linguistic structure affects terms of loan contracts.

Keywords: language, bank, loans

JEL Classification: D83, G20, G41, Z13

Suggested Citation

Godlewski, Christophe J. and Weill, Laurent, Are Loans Cheaper When Tomorrow Seems Further? (March 5, 2019). Available at SSRN: https://ssrn.com/abstract=3347225 or http://dx.doi.org/10.2139/ssrn.3347225

Christophe J. Godlewski (Contact Author)

University of Strasbourg - Faculty of Law and Business ( email )

1 place d'Athènes
Strasbourg, 67000
France

HOME PAGE: http://droit.unistra.fr/

EM Strasbourg Business School ( email )

61 Avenue de la Forêt Noire
Strasbourg, 67000
France

HOME PAGE: http://www.em-strasbourg.eu/

LaRGE Research Center ( email )

1 place d'Athènes
Strasbourg, 67000
France

HOME PAGE: http://droit.unistra.fr/

Laurent Weill

University of Strasbourg - LaRGE Research Center (Laboratoire de Recherche en Gestion et Economie) ( email )

61 Avenue de la Forêt Noire
F-67085 Strasbourg Cedex
France

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