The research originates from a comment to the famous 1981 Stiglitz - Weiss paper. In their work, mainly focused on the problem of credit rationing, the authors point out that nor the interest rate nor collateral are instruments suited for achieving a market clearing equilibrium. The idea here analysed is, instead, that the posting of collateral by entrepreneurs could be interpreted as a signalling strategy about the “goodness” of the investment project. This hypothesis can be of interest not only, let say, for macroeconomic considerations, but even for the bank internal rating process. In fact lenders could theoretically use information gained in the contracting process as an input for the assessment of borrowers creditworthiness. We first present a review of theoretical and empirical literature; then we study the optimisation problems of banks and entrepreneurs with reference to the bargain of credit contracts variables; a simple numerical example is also presented. The last part of the research, after the specification of two main testable hypotheses, is devoted to the analysis of a detailed database of credit contracts. Findings are against the hypothesis that collateral is positively related to project quality.
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