The role of long-term contracting in business lending / by Phoebe Tian. : FB3-5/2024-2E-PDF
"This paper examines inefficiencies arising from a lack of long-term contracting in small business lending in China. I develop and estimate a dynamic model where firms repeatedly interact with the same lender. All loans are short-term. Collateral can be used to deter a strategic default by a firm, but the lender cannot recover the full value of the collateral in the case of a default. The endogenous contract terms—including interest rates, loan size and collateral—reflect a firm’s probability of default in equilibrium. Learning drives the dynamics of contract terms because a firm’s profitability type is unknown. Long-term contracts improve welfare mainly by mitigating the incentives for a firm to default"--Abstract, page ii.
Lien permanent pour cette publication :
publications.gc.ca/pub?id=9.938478&sl=1
| Ministère/Organisme | Bank of Canada, issuing body. |
|---|---|
| Titre | The role of long-term contracting in business lending / by Phoebe Tian. |
| Titre de la série | Staff working paper = Document de travail du personnel, 1701-9397 ; 2024-2 |
| Type de publication | Série - Voir l'enregistrement principal |
| Langue | [Anglais] |
| Format | Électronique |
| Document électronique | |
| Note(s) | ISSN assigned to different series. "Last updated: February 2, 2024." Includes bibliographical references (pages 52-55). Includes abstracts in English and French. |
| Information sur la publication | [Ottawa] : Bank of Canada = Banque du Canada, 2024. ©2024 |
| Auteur / Contributeur | Tian, Phoebe, author. |
| Description | 1 online resource (ii, 68 pages) : graphs. |
| Numéro de catalogue |
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| Descripteurs | Commercial loans -- China. Financial institutions -- China. Prêts commerciaux -- Chine. Institutions financières -- Chine. |
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