Credit rationing and the use of collateral are widely observed in debt financing. To our view there is yet no … collateral is limited. In our model we show that credit rationing and the use of collateral are always necessary for debt … resulting from the information asymmetry. Furthermore, we extend the set of possible collateral to property rights over physical …

We offer a new test of the ex ante theory of collateral. Theory states that lenders rely less on collateral if they … have better information about borrowers. We test this by contrasting the use of collateral between formal and – better … informed – informal lenders in a developing financial market. Indeed, formal lenders rely about 40% more often on collateral …

The ex ante theory of collateral states that better informed lenders, such as informal lenders, rely less on collateral …. We test this by contrasting the use of collateral between formal and informal lenders in the same market. Indeed, formal … lenders rely more often on collateral, controlling for conventional determinants of collateral. Moreover, better information …