Han, Liang, Fraser, Stuart and Storey, David J.. (2009) Are good or bad borrowers discouraged from applying for loans? Evideance from US small business credit markets. Journal of Banking & Finance, Vol.33 (No.2). pp. 415-424. ISSN 0378-4266

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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. (c) 2008 Elsevier B.V. All rights reserved.

Item Type:	Journal Article
Subjects:	H Social Sciences > HG Finance H Social Sciences > HC Economic History and Conditions
Divisions:	Faculty of Social Sciences > Warwick Business School > Centre for Small & Medium-Sized Enterprises Faculty of Social Sciences > Warwick Business School
Journal or Publication Title:	Journal of Banking & Finance
Publisher:	Elsevier Science BV
ISSN:	0378-4266
Date:	February 2009
Volume:	Vol.33
Number:	No.2
Number of Pages:	10
Page Range:	pp. 415-424
Identification Number:	10.1016/j.jbankfin.2008.08.014
Status:	Peer Reviewed
Publication Status:	Published
Access rights to Published version:	Restricted or Subscription Access
URI:	http://wrap.warwick.ac.uk/id/eprint/28766

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