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Are Good or Bad Borrowers Discouraged From Applying for Loans? Evidence from US Small Business Credit Markets

Han, L, Fraser, S and Storey, D (2009) Are Good or Bad Borrowers Discouraged From Applying for Loans? Evidence from US Small Business Credit Markets Journal of Banking and Finance, 33. pp. 415-424.

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Abstract

This paper takes the concept of a discouraged borrower originally formulated by Kon and Storey [Kon, Y., Storey, D.J., 2003. A theory of discouraged borrowers. Small Business Economics 21, 37–49] and examines whether discouragement is an efficient self-rationing mechanism. Using US data it finds riskier borrowers have higher probabilities of discouragement, which increase with longer financial relationships, suggesting discouragement is an efficient self-rationing mechanism. It also finds low risk borrowers are less likely to be discouraged in concentrated markets than in competitive markets and that, in concentrated markets, high risk borrowers are more likely to be discouraged the longer their financial relationships. We conclude discouragement is more efficient in concentrated, than in competitive, markets.

Item Type: Article
Divisions : Faculty of Arts and Social Sciences > Surrey Business School
Authors :
AuthorsEmailORCID
Han, LUNSPECIFIEDUNSPECIFIED
Fraser, SUNSPECIFIEDUNSPECIFIED
Storey, DUNSPECIFIEDUNSPECIFIED
Date : 1 February 2009
Identification Number : https://doi.org/10.1016/j.jbankfin.2008.08.014
Additional Information : Copyright 2009 Elsevier. All rights reserved
Depositing User : Symplectic Elements
Date Deposited : 28 Mar 2017 14:38
Last Modified : 28 Mar 2017 14:38
URI: http://epubs.surrey.ac.uk/id/eprint/205743

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