Collateral, loan quality and bank risk

@article{Berger1988CollateralLQ,
  title={Collateral, loan quality and bank risk},
  author={Allen N. Berger and Gregory F. Udell},
  journal={Journal of Monetary Economics},
  year={1988},
  volume={25},
  pages={21-42}
}
Abstract Most commercial loans are made on a secured basis, yet little is known about the relationship between collateral and credit risk. Several theoretical studies find that when borrowers have private information about risk, the lowest-risk borrowers tend to pledge collateral. In contrast, conventional wisdom holds that when risk is observable, the highest-risk borrowers tend to pledge collateral. An additional issue is whether secured loans (as opposed to secured borrowers) tend to be… Expand
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