perceived credit constraints in the european union the promotion and support of small and medium sized enterprises smes is an essential component of policies designed to help improve europe s economic performance a crucial issue is whether smes face difficulty obtaining bank loans using pre crisis survey data from 2005 and 2006 for nearly 3 500 smes firms with fewer than 250 employees in the european union eu we investigate the determinants of perceived bank loan accessibility at the firm level and at the country level based on hierarchical multi level binomial logit regressions our findings show that the youngest and smallest smes have the worst perception of access to bank loans the smes in nations with concentrated banking sectors are more positive about loan accessibility in addition a high fraction of foreign owned banks is associated with improved perception of loan accessibility in the eu 15 but not in the eu 10

uncertainty shocks and firm creation search and monitoring in the credit market abstract we develop a business cycle model where endogenous firm creation stems from two credit market frictions first entrepreneurs search for a lending relationship with a bank second an optimal debt contract with monitoring is implemented we analyze the interplay between both frictions and embed it into an otherwise standard business cycle model which we estimate with bayesian techniques we find that uncertainty shocks are a prime contributor to business cycle fluctuations in the us not only for macro financial aggregates but also for firm creation moreover we point out that the credit search friction dampens the financial accelerator mechanism because default may imply the end of the lending relationship

a noncooperative analysis of hotelling s location game abstract we study the location equilibrium in hotelling s model of spatial competition as d aspremont et al have shown with quadratic consumer transportation cost the two sellers will seek to move as far away from each other as possible we show that the location game possesses an infinity of mixed strategy nash equilibria in these equilibria coordination failure invalidates the principle of maximum differentiation and firms may even locate at the same point journal of economic literature classification numbers c72 d43 l11

asymmetric changes in australia s small business loan rate this paper examines the dynamic asymmetric relationship between changes in the reserve bank of australia s rba cash rate and the interest rate for small business loans using monthly data 1990 2011 the results provide support for the rockets and feathers hypothesis with respect to both the amount and adjustment asymmetries while the rba s rate rises exert a one to one and instantaneous impact on the loan rate its rate cuts are only slowly and partially passed onto small businesses with a delay of 1 2 months the results also suggest that the recent global financial crisis increased the cost of borrowing for small businesses in australia by 2 21 these findings indicate that small businesses have limited time to respond to interest rate rises and not provided with the full benefit of interest rate decreases addressing this problem should ease the interest rate burden for small businesses and enhance their contribution to the economy

price matching policy and the principle of minimum differentiation this paper shows that if duopolists are allowed to choose their product locations a price matching policy and their prices sequentially and independently both tacit collusion and minimum differentiation occur copyright 1995 by blackwell publishing ltd

do firms get the financing they want measuring credit rationing experienced by small businesses in the u s this paper measures the extent to which small businesses in the united states in the late 1980s were able to access the external credit finance they desired we argue that a comprehensive definition of credit rationing must account for both a creditworthy firms that apply for and are denied financing and b creditworthy firms that decide not to apply for desired external financing given expectations about how long it may take to obtain financing and the evolution of investment opportunities

impact of environmental regulations on trade in the main eu countries conflict or synergy in an increasingly integrated world with declining trade barriers environmental regulations can have a decisive role in shaping countries comparative advantages the conventional wisdom about environmental protection is that it comes at an additional cost on firms imposed by the government which may erode their global competitiveness however this paradigm has been challenged by some analysts in particular porter 1991 and porter and van der linde 1995 argue that pollution is often associated with a waste of resources and that more stringent environmental policies can stimulate innovations that may over compensate for the costs of complying with these policies this is known as the porter hypothesis while there is a broad empirical literature on the impact of trade on environment the empirical literature on the impact of environmental regulations on trade flows is relatively scarce very heterogeneous and presents mixed results the innovative feature of this paper is its attempts to estimate in a gravity setting augmented with a proxi of environmental stringency the impact of three major multilateral environmental agreements meas on 15 eu countries bilateral exports according to our estimates in the period 1988 2008 to be member of meas had a positive average impact on eu15 bilateral exports this evidence can be partly explained by a possible trade diversion effect with respect to countries that did not sign meas and a corresponding trade creation effect among members of the environmental agreements furthermore evidence coming from interaction effects estimates seems to show that for exporting countries having signed the unfccc and the montreal agreements partly mitigates by the amount of the estimated coefficient the negative impact of having a relatively more stringent environmental regulation on bilateral trade this result could have important policy implications for the future international trade environmental negotiations

are small innovators credit rationed drawing upon a sample of 256 small firms who applied for bank loans the current paper is concerned with the extent to which innovativeness is associated with a lower level of loan application success the paper records the proportion of loan successfully applied for and estimates a series of tobit models utilising a number of proxy measures for innovation in terms of inputs outputs and commercial significance to the firm and incorporating standard controls in general the models suggest as anticipated that the most innovative firms are less successful in loan markets than their less innovative peers though there is some variation by proxy moreover there is tentative evidence that a little innovation may be a good thing

asymmetric equilibria in spatial competition abstract the main purpose of this paper is to study the impact of consumer concentration around the market center on the equilibrium locations of location price games in the case of symmetric triangular density it is shown that no symmetric equilibrium exists however we demonstrate the existence of asymmetric equilibria in pure strategies these equilibria are also characterized our secondary purpose is to study the sequential entry of two firms when the location space is not restricted to the market space this leads us to uncover a substantial first mover advantage which has been neglected in the literature

the competitive effects of price floors using hotelling s model of locational competition we show that a moderate price floor destroys the maximal differentiation equilibrium resulting in minimum differentiation equilibrium prices are lower than prices in the absence of a floor a low price floor can lead to multiple equilibria with both minimum and maximum differentiation as possible outcomes

toward a new conception of the environment competitiveness relationship accepting a fixed trade off between environmental regulation and competitiveness unnecessarily raises costs and slows down environmental progress studies finding high environmental compliance costs have traditionally focused on static cost impacts ignoring any offsetting productivity benefits from innovation they typically overestimated compliance costs neglected innovation offsets and disregarded the affected industry s initial competitiveness rather than simply adding to cost properly crafted environmental standards can trigger innovation offsets allowing companies to improve their resource productivity shifting the debate from pollution control to pollution prevention was a step forward it is now necessary to make the next step and focus on resource productivity

who is credit constrained in the u s economy an important assumption of the life cycle model of consumption is the postulate of perfect capital markets this hypothesis has recently been challenged by substantial empirical evidence hall and mishkin 1982 using the panel study of income dynamics estimate that 20 percent of united states families are liquidity constrained mariger 1986 derives a life cycle model with endogenous liquidity constraints and using a cross section estimates this fraction to be 19 4 percent hubbard and judd 1986 simulate a model with a constraint on net worth which shows that with reasonable assumptions about preferences 19 0 percent of united states consumers are liquidity constrained the emerging consensus points therefore to a fraction of approximately 20 percent of the population behaving in a manner that is inconsistent with the pure life cycle model in addition hayashi 1985 and zeldes 1989 investigate the correlation among consumption wealth and income for various population groups and infer that liquidity constraints are more important for younger families with low levels of wealth and saving the main limitation of these studies is that in their data sets constrained consumers are not observable and have to be identified via indirect evidence thus there is as yet little firm evidence about the characteristics of the consumers who are likely to be credit constrained this paper adopts an approach that differs from previous tests for liquidity constraints because it makes use of data where constrained consumers are observable and explicitly links their existence to credit market imperfections and personal characteristics the data drawn from the 1983 survey of consumer finances scf and described in section ii provide information on individuals whose request for credit has been rejected by financial intermediaries in section iii a model is developed in which consumers and lenders behavior jointly determines the probability that a consumer is rationed in the credit market this probability is then

internet start ups access to the bank loan market evidence from italy the analysis of the bank sector s ability to efficiently fuel the birth of new italian business ventures in internet related services is studied in particular through the specification and the estimate of a series of econometric models this paper aims at investigating which characteristics of a large sample of internet start ups and their relative founders facilitate access to the loan market more precisely the role played by founders human capital as a possible significant signal used by banks to evaluate investment projects is addressed estimation results suggest that highly qualified human resources possessed by internet founders do not represent an important driver for gaining access to bank credit and they do not affect the amount of the incurred debt

the impact of environmental policy on international competitiveness in manufacturing the aim of this study is to test the hypothesis that environmental stringency adversely affects the international competitiveness net exports in manufacturing sectors the model follows the standard factor endowment approach to explain the effects of environmental regulatory policy on net exports in different product based industries an econometric model is constructed which includes factor endowments and environmental regulations to examine how strict environmental policies impact export competitiveness a panel dataset of 10 organisation for economic co operation and development oecd countries over 17 years 1987 2003 was constructed for the modelling effort the study finds that environmental regulations can be a way to combat the flight of manufacturing out of developed countries if the output from these industries can be identified as environmentally friendly a positive relationship between net exports and environmental regulations was found for paper products wood products and textile prod

a model of the commercial loan rate this paper explores the theoretical and empirical determinants of the commercial loan rate charged by commercial banks based on a model of financial intermediary behavior which assumes monopolistic competition in asset and liability markets the model incorporates the constraint that banks must maintain at least a minimum quantity of bonds in asset portfolios equations are estimated on a time series basis to explain the behavior of commercial loan rates over the period 1953 to 1980 the evidence appears consistent with the hypothesis that commercial banks operate in a market characterized by imperfect competition and that they explicitly set loan rates the development of large scale econometric models has focused attention on the operation of the commercial loan market because of the importance of commercial loan activity in the transmission of monetary policy moreover it is commonly accepted that the quantity of commercial loans or changes in these loans has an important influence on the holding of free reserves by commercial banks and this implies that the commercial loan market has an effect on the supply of money 2 nevertheless the determinants of commercial loan rates have drawn relatively little analytical attention previous work on the commercial loan market has generally focused on the question of whether this market is characterized by credit rationing 3 most studies assume that the commercial loan market is generally competitive but at times the commercial loan rate does not clear the market the quantity of loans transacted is constrained by the supply function and commercial banks engage in nonprice rationing of customers a corollary of this rationing hypothesis is that events in the deposit market have an important influence on the quantity of commercial loans 4 the purpose of this paper is to explore the determinants of the commercial

business starters and credit rationing this paper investigates which business starters experience credit rationing by simultaneously analyzing which business founders apply for credit and which are refused we argue that credit denial depends largely on the entrepreneurs commitment and signals regarding the repayment of the loan and the success chances of the proposed business our empirical analysis is based on a sample of 1140 potential business starters in the dutch county south limburg our findings show that commitments drive the credit application and approval while the effects of signals are mixed the findings also suggest that business founders have a pretty good idea regarding whether their applications will be honored or not

trade the pollution haven hypothesis and the environmental kuznets curve examining the linkages abstract this paper examines the extent to which the ekc inverted u relationship can be explained by trade and specifically the migration or displacement of dirty industries from the developed regions to the developing regions the pollution haven hypothesis phh using detailed data on north south trade flows for pollution intensive products the evidence for the phh is assessed emissions of 10 air and water pollutants are then estimated controlling for trade openness structural change and dirty north south trade flows evidence of pollution haven effects is found although such effects do not appear to be widespread and appear to be relatively small compared to the roles played other explanatory variables

internal vs external financing of r d the empirical evidence suggests that while small firms in united states united kingdom and canada rely on internal funds for financing r d similar firms in japan germany and france have access to bank loans in this paper we analyze the financial decisions of small firms willing to invest in r d we find that their high ratio of intangible assets along with the high risk nature of their investments can explain their inability to raise debt in external capital markets we also show that financing r d with bank loans might be feasible especially if banks are willing to monitor the investment activities of their clients

impacts of the us dollar usd exchange rate on economic growth and the environment in the united states abstract this paper investigates the impact of the usd exchange rate on economic growth and the environment in the united states by using a structural vector autoregression svar model the analysis is based on quarterly country level data on the real trade weighted us dollar index petroleum consumption renewable energy consumption net imports of pollution intensive products real gdp and co2 emissions during the 1989 2015 the result shows that the usd exchange rate is positively related to petroleum consumption net imports of the united states in pollution intensive industries with major u s trading partners real gdp and co2 emissions moreover petroleum consumption increases real gdp and domestic co2 emission levels while net imports of pollution intensive products decrease real gdp and does not significantly affect co2 emissions

environmental regulations in gravity equations evidence from europe one implication of the pollution haven hypothesis is that countries export more by applying more lenient environmental regulations most studies that apply gravity type equations do not find robust support for environmental regulations to affect bilateral exports in this paper we show that one can obtain robust negative effects of stringency as long as gravity equations are well specified with respect to theory our results based on the european data are both very consistent with us studies on environmental regulations and another line of very recent studies that infer non biased price or substitution elasticities from trade equations we show that more stringent environmental regulations when depicting a pure cost effect are reducing exports the coefficient is even larger in the case where exporting countries are central and eastern european countries comparing to the eu15 further we show that there is no significant difference in the impact of regulations on trade in case of dirty and clean sectors finally when using gmm estimation our environmental stringency coefficient gets significantly reinforced

bootstrapping in small firms an empirical analysis of change over time abstract while bootstrapping is widely utilized as a strategic practice of small firms and has been regarded in the entrepreneurship literature as an important topic of study little has been done to link bootstrapping to organizational theory this paper presents hypotheses and an empirical study regarding bootstrapping and organizational development for small firms the results of the study indicate that different types of bootstrapping are utilized at different periods in the life of a small firm and that the methods utilized coincide to some extent with organizational theory predictions

how does foreign direct investment affect pollution toward a better understanding of the direct and conditional effects this paper seeks to investigate the impact of foreign direct investments fdis on industrial pollution hbox co 2 hbox so 2 hbox no mathrm x and bod emissions on a large sample of highly heterogeneous countries by using panel data on manufacturing fdis from france germany sweden and the united kingdom between 1995 and 2008 and by developing an empirical model with first and second order interaction terms we investigate the existence and the conditionality of the most controversial fdi induced effects on industrial emissions i e pollution haven factor endowments and pollution halo hypotheses the paper has three main findings 1 the central hypotheses linking pollution to fdi are found to act simultaneously with opposing effects 2 fdis are associated with pollution reduction i e predominating pollution halo induced effect in countries with low to average capital to labour ratio but not too lax environmental regulation 3 fdis are found to increase pollution i e prevailing pollution haven and or factor endowments induced effects in countries with average capital endowments and lax environmental regulations as well as in all the capital abundant countries though with a smaller magnitude in countries having strict environmental regulations and or a high skilled labour force some specific and interesting findings are discussed regarding different fdi origin countries and fdi host country groups

minimal and maximal product differentiation in hotelling s duopoly abstract hotelling s 1929 model of duopolistic competition is re examined a family of utility functions is used which has as a special case hotelling s original utility function in a two stage location price game it is shown that an equilibrium exists when the curvature of the utility functions in the space of characteristics is sufficiently high the subgame perfect equilibrium never exhibits minimum product differentiation on the other hand not all equilibria are at maximal product differentiation

on the determinants of credit rationing firm level evidence from transition countries abstract using survey data for firms from eastern european transition economies we investigate the determinants of credit rationing our rationing definition incorporates firms whose loan application was rejected but also discouraged potential borrowers we employ a bivariate probit with censoring approach that accounts for the underlying selectivity since rationed firms are a subset of those without a loan we include firm specific attributes related to the alleviation of informational asymmetries and therefore expected to affect credit rationing we find that credit rationing depends on firm size profitability sales growth ownership type legal status sectoral heterogeneity and the country specific level of domestic credit

the latent demand for bank debt characterizing discouraged borrowers concerns that small firms encounter credit constraints are well entrenched in the literature despite widespread empirical evidence that a relatively small proportion of small firms have their loan applications rejected however many firms may be discouraged from applying for fear of rejection these businesses are the focus of this paper based on responses to a large scale postal survey of uk small and medium sized enterprises smes we find that twice as many businesses were discouraged from applying for a bank loan than had their loan request denied more particularly we observe a number of distinguishing characteristics of discouraged borrowers relative to applicants these include strategy sector prior entrepreneurial experience and banking relationships the implications of our findings for policy and future research are briefly discussed

the cost of growth small firms and the pricing of bank loans drawing upon data from the 2007 uk survey of sme finance the current analysis is concerned with the extent to which growth firms are discriminated on price in loan markets or more simply the extent to which growth firms pay more for credit given relatively small turndown rates historically vos et al in j bank finance 31 9 2648 2672 2007 higher credit prices may be a more substantial growth constraint than the access to finance issues that have dominated the academic literature to date to this end we observe inter alia that firms who have recorded recent high growth are more likely to pay higher interest rates for the loan they obtained moreover small sized firms who intend to grow through the introduction of new products exhibit a higher probability of paying more for credit than their peers finally acknowledging that banks are not risk funders we discuss the potential policy implications of these findings

partial collusion fosters minimum product differentiation we investigate a spatial duopoly in which the firms simultaneously select locations at the beginning of time once chosen the locations are fixed forever but the firms will choose prices in each of a countably infinite succession of time periods we are interested in equilibrium behavior when the firms will collusively arrange a trigger strategy equilibrium in prices and will select their locations knowing that a particular such trigger strategy price equilibrium will ensue specifically we restrict our attention to prices that support an outcome on the profit possibility frontier at which the ratio of firm 1 s profits to those of firm 2 is positively related to the similar ratio of profits at the single shot noncooperative equilibrium for these profit sharing rules the resulting location equilibrium is unique and involves the pairing of firms at the market center

is environmental efficiency trade inducing or trade hindering abstract global efforts to identify strategies for sustainable economic growth and development underline the need for understanding important links between environmental policies and international trade in this paper by constructing an environmental efficiency index for 111 countries from 1980 to 2009 we are able to empirically test for one such link an improvement in the environmental efficiency index in terms of carbon dioxide emissions reflects a decrease in the cost of efforts to mitigate the environmental costs associated with growth countries that improve their environmental efficiency are found to experience strong international trade effects both through increased exports and increased imports while the positive link between efficiency improvements and exports is supportive of the porter hypothesis the positive link between efficiency improvements and imports is supportive of strong positive income effects on account of environmental efforts these results which are robust to alternative estimation strategies lend strong support to global efforts to improve countries environmental efficiencies

did risk based capital allocate bank credit and cause a credit crunch in the united states this paper examines the reallocation of bank credit from loans to securities in the early 1990s using data on virtually all u s banks from 1979 to 1992 the authors investigate implementation of risk based capital and other regulatory and nonregulatory changes as possible causes of a supply driven credit crunch the main empirical implication of these credit crunch hypotheses that the reallocation of credit would be most associated with low capital high risk banks generally is not consistent with the data much of the reallocation is associated with demand side factors but it is difficult to differentiate cleanly among these factors copyright 1994 by ohio state university press

are good or bad borrowers discouraged from applying for loans evidence from us small business credit markets 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

environmental regulation and the export dynamics of energy technologies abstract the pollution haven hypothesis affirms that an open market regime will encourage the flow of low technology polluting industries toward developing countries because of potential comparative advantages related to low environmental standards in contrast the hypothesis suggested by porter and van der linde claims that innovating firms operate in a dynamic competitive situation which allows global diffusion of environmental friendly technologies environmental regulation may represent a relevant mechanism through which technological change is induced in this way countries that are subject to more stringent environmental regulations may become net exporters of environmental technologies this paper provides new evidence on the evolution of export flows of environmental technologies across different countries for the energy sector advanced economies particularly the european union have increasingly focused on the role of energy policies as tools for sustaining the development path the kyoto protocol commitments together with growing import dependence on energy products have brought attention to the analysis of innovation processes in this specific sector the analysis uses a gravity model in order to test the determinants and the transmission channels through which environmental technologies for renewable energies and energy efficiency are exported to advanced and developing countries our results are consistent with the porter and van der linde hypothesis where environmental regulation represents a significant source of comparative advantages what strongly emerges is that the stringency of environmental regulation supplemented by the strength of the national innovation system is a crucial driver of export performance in the field of energy technologies

does host market regulation induce cross border environmental innovation this paper evaluates the effect of host country environmental policy stringency on the offshoring of environmental patents for 2000 top world r d performers it is shown that a more stringent environmental regulation triggers both the extensive and intensive margin of patent offshoring in the field of environmental technologies results are robust to various different specifications alternative definitions of innovation offshoring and of regulation restrictions and to the consideration of possible endogeneity of regulation it is suggested inter alia that r d subsidies and non market based regulatory measures are more important than market based instruments as drivers of cross border environmental innovation length 26 pages

are business startups debt rationed using a large random sample of u k start ups and a rich data set the paper demonstrates that human capital is the true determinant of survival and that the correlation between financial capital and survival is spurious provision of finance is demand driven with banks supplying funds elastically and business requests governing take up firms self select for funds on the basis of the human capital endowments of the proprietors with better businesses more likely to borrow a reason why others have seemingly identified start up debt gaps may be the failure to test a sufficiently rich empirical model copyright 1996 by royal economic society

credit rationing and the monetary transmission mechanism according to alan blinder s 1987 model of credit rationing a tightening of monetary policy may have strong effects on the real sector when credit is already tight but weak effects when credit is initially plentiful p 343 the tighter the state of recent monetary policy the more likely it is that the economy s credit constraint will be binding and hence the greater will be the output effects of monetary policy this paper provides a test of the blinder proposition using postwar quarterly u s data and the results are then used to estimate the importance of credit rationing as a channel through which monetary policy influences the economy i consider three alternative criteria for determining when the economy is creditrationed the first criterion states that the economy is credit rationed if recent monetary policy as measured by one of two alternative monetary variables has been substantially tighter than average the second method draws on work by otto eckstein 1983 and allen sinai 1976 who developed estimates of periods of credit crunch based on a wide variety of indicators of credit market conditions the third and final approach is based on stephen king s 1986 estimates of the excess demand for commercial bank lending section i develops the specification of the tests section ii reports regressions and analyzes the implications for the monetary transmission mechanism and section iii presents conclusions

modelling the impact of environmental regulations on bilateral trade flows oecd 1990 1996 since the early seventies an increasing attention has been paid to the impact environmental polict nmight have on foreign trade one of the most important issues is whether countries with relatively strict environmental regulations tend to experience a deterioration of international competitiveness and thus a fall in exports and a rise in imports of the pollution intensive commodities or on the other hand benefit from the improvement in environmentally more sensitive industries so far most empirical studies have concluded that the proportion of environmental costs to the total production costs is still so marginal that environmental policies have hardly any effect on comparative advantage patterns and thus on foreign trade one of the few exceptions is van beers and van den bergh 1997 who found that stricter regulations have some negative impact on bilateral trade flows between oecd countries the aim of this paper is to show that tyhis outcome is partly due to model mis specification the analysis id based on a triple indexed model and on its variants it is found that as soon as both the importing and exporting country specific effects are taken into consideration the relationship between stricter regulations and foreign trade becomes statistically insignificant this suggests that environmental costs do not have a real impact neither negative nor positive on foreign trade

the benefits of lending relationships evidence from small business data this paper empirically examines how ties between a firm and its creditors affect the availability and cost of funds to the firm we analyze data collected in a survey of small firms by the small business administration the primary benefit of building close ties with an institutional creditor is that the availability of financing increases we find smaller effects on the price of credit attempts to widen the circle of relationships by borrowing from multiple lenders increases the price and reduces the availability of credit in sum relationships are valuable and appear to operate more through quantities rather than prices

some evidence on the empirical significance of credit rationing this paper examines the credit rationing debate using detailed contract information on over one million commercial bank loans from 1977 to 1988 while commercial loan rates are sticky consistent with rationing this stickiness varies with loan contract terms in ways that are not predicted by equilibrium credit rationing theory in addition the proportion of new loans issued under commitment does not increase significantly when credit markets are tight despite the fact that borrowers without commitments can be rationed whereas commitment borrowers are contractually insulated from rationing overall the data suggest that equilibrium rationing is not a significant macroeconomic phenomenon

a theory of discouraged borrowers this paper examines the implications for the sme financing market of application costs that vary between firms and of imperfect screening of applicants by banks under these conditions discouraged borrowers can exist these are good borrowers who do not apply for a bank loan because they feel they will be rejected the paper shows that under a range of assumptions the scale of discouragement in an economy depends upon the screening error of the banks the scale of application costs and the extent to which the bank interest rate differs from that charged by the moneylender discouragement is shown to be at a maximum where there is some but not perfect information

business collateral and personal commitments in sme lending abstract using a database of sme credit approvals from a large belgian bank this paper extends the empirical evidence on the determinants of collateral by examining the determinants of business collateral simultaneously with the determinants of personal collateral commitments our results suggest that firm and relationship characteristics seem to be more important determinants of collateral commitment protection than loan and lender characteristics family firms are more likely to offer a higher degree of collateral commitment protection while introducing competition between banks decreases this likelihood the collateral requirement decreases in the length of the bank borrower relationship furthermore trade credit seems to have a signalling effect the lazy banks hypothesis was not supported our results suggest that beside risk arguments also commercial arguments help explain the pledging of collateral using a continuation ratio logit model we discover several differences in the determinants of the collateralisation decision and the determinants of the type of collateral commitments