Previous research on relationship lending has paid very little attention to the role of trust. Trust might be ex-pected to reduce agency costs, perceived credit risk and thus the request for personal collateral. Trustworthiness is associated with three attributes of SME owner/managers’: ability, benevolence and integrity. We hypothe-sised that loan managers’ assessment of the trustworthiness of owner/managers is negatively associated with the personal collateral demanded by banks. Using the quantitative and qualitative data about 457 SMEs-bank rela-tionships in North East Italy, we tested this hypothesis. The results show that trust has a minor role in reducing the request of collateral.
G21, M13, D82
Trust, Relationship lending, Relationship Banking, SME, Personal Collateral
Moro, Andrea; Lucas, Mike R.; and Kodwani, Devendra
"Trust and the Demand for Personal Collateral in SME - Bank Relationships,"
The Journal of Entrepreneurial Finance:
1, pp. 57-79.
Available at: http://digitalcommons.pepperdine.edu/jef/vol16/iss1/3