Collateralized subsample
Here is a fictitious academic paper:
“We consider a sample of 254 firms over the period
1996-1999. We find that 80% of interviewed entrepreneurs would be ready to pay
an extra 4% on their loans in order to be able to borrow more. We interpret
this evidence that banks forgo highly profitable investment opportunities. The
size of such inefficiency appears to be at offs with the well documented
efficiency of other financial sectors. We provide possible explanations for the
inefficiency in terms of bureaucracy and mismanagement which are likely to
affect the Banking sector more than other financial sectors. Finally, we
document the existence of puzzle. Apparently, the inefficiency disappears when
we restrict attention to a subsample of firms whose loans are fully
collateralized. We believe that the striking difference between the
collateralized subsample and the rest of the sample is an issue worth of
further research”.
– What does the evidence suggest?
– How could the authors improve their paper?
– Can you think of any explanation for the “collateralized
subsample” puzzle?
