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Analysis of the Terms of Bank Lending and Risk Management: Three Essays on Small Business Loans

Posey, Raymond L., Jr.
http://rave.ohiolink.edu/etdc/view?acc_num=csu1268432575

Abstract Details

2010, Doctor of Business Administration, Cleveland State University, Nance College of Business Administration.
This is a three-part dissertation, which provides a multi-faceted examination of loans and lending to small businesses in the US, which are a key source of economic and job growth. From a broad perspective, this work shows the interplay among various terms of lending, marked differences in lender behavior based on size and type, and a significant role of multiple loans/lenders in explaining loan delinquencies. Essay 1 examines the role of loan guarantees in lines of credit grated to small businesses. The presence of a loan guarantee is associated with lower interest rates and smaller lines of credit. There is some evidence that loan guarantees and collateral are substitutes. Firms with longer banking relationships and fewer banking relationships are less likely to have loan guarantees applied. Since there is some evidence of simultaneity in the data, appropriate econometric procedures are used to obtain consistent parameter estimates. Essay 2 examines differences in terms of lending among two sizes of banks and farm lenders for small loans. Large farm lenders do use more collateral than large bank lenders, but small banks use more collateral than small farm lenders. There is evidence that small banks use more collateral than large banks. All farm lenders appear to use similar levels of collateral, whereas small banks use more collateral than large banks. The determinants of collateral differ based on lender characteristics. For all sizes of farm lenders, the shorter the term of the loan, the more likely the use of non-real estate collateral, and vice versa. Essay 3 examines the determinants of farm loan delinquencies, and in particular, the influence of multiple loans and multiple lenders on delinquency. The number of lenders used by a borrower, the number of loans, and the product of the two are all positively related to loan delinquency. These factors are at least as significant as standard financial ratios in explaining loan delinquency. The most consistent finding regarding farm borrower delinquency is that borrowers who have been denied credit in the past five years are more likely to have a delinquent loan. It is also found that borrowers using more lenders appear to be able to bargain for lower interest rates.
Alan Reichert, PhD (Committee Chair)
Dieter Gramlich, PhD (Committee Member)
Walter Rom, PhD (Committee Member)
Haigang Zhou, PhD (Committee Member)
168 p.
Banking; Finance
loan guarantee; delinquency; terms of lending; bank relationship; collateral

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Citations

  • Posey, Jr., R. L. (2010). Analysis of the Terms of Bank Lending and Risk Management: Three Essays on Small Business Loans [Doctoral dissertation, Cleveland State University]. OhioLINK Electronic Theses and Dissertations Center. http://rave.ohiolink.edu/etdc/view?acc_num=csu1268432575

    APA Style (7th edition)

  • Posey, Jr., Raymond. Analysis of the Terms of Bank Lending and Risk Management: Three Essays on Small Business Loans. 2010. Cleveland State University, Doctoral dissertation. OhioLINK Electronic Theses and Dissertations Center, http://rave.ohiolink.edu/etdc/view?acc_num=csu1268432575.

    MLA Style (8th edition)

  • Posey, Jr., Raymond. "Analysis of the Terms of Bank Lending and Risk Management: Three Essays on Small Business Loans." Doctoral dissertation, Cleveland State University, 2010. http://rave.ohiolink.edu/etdc/view?acc_num=csu1268432575

    Chicago Manual of Style (17th edition)

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This open access ETD is published by Cleveland State University and OhioLINK.