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Loan Rates and Collateral

Authors

  • Aron A. Gottesman,

    1. Lubin School of Business, Pace University
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  • Gordon S. Roberts

    Corresponding author
    1. Schulich School of Business, York University
      * Corresponding author: CIBC Professor of Financial Services, Schulich School of Business, York University, 4700 Keele Street, Toronto, Ontario, Canada M3J 1P3; Phone: (416) 736-2100, ext. 77953; Fax: (416) 736-5687; E-mail: groberts@schulich.yorku.ca
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  • Financial support for this project came from the Social Sciences and Humanities Research Council of Canada and the CIBC Professorship in Financial Services at the Schulich School of Business. The authors thank three referees for this journal as well as Linda Allen, Allen Goss, and Edward Yuan for useful comments.

* Corresponding author: CIBC Professor of Financial Services, Schulich School of Business, York University, 4700 Keele Street, Toronto, Ontario, Canada M3J 1P3; Phone: (416) 736-2100, ext. 77953; Fax: (416) 736-5687; E-mail: groberts@schulich.yorku.ca

Abstract

We investigate the relation between corporate loan spreads and collateralization. We use propensity scoring to create a matched sample of pairs of loan facilities from the Dealscan database. We find that noncollateralized loans are associated with lower spreads even after controlling for risk.

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