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Are loans cheaper when tomorrow seems further?

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  • Godlewski, Christophe
  • Weill, Laurent

Abstract

This paper studies how future tense marking affects the terms of bank loans. We predict that languages that grammatically mark the future affect speakers’ intertemporal preferences and thereby reduce the perception of the risks associated with loan issuance. We test this hypothesis on a sample of 977 bank loans from 17 European countries. We observe that the use of a language with future tense marking is associated with lower loan spreads and lower collateral use in loan contracts. The results corroborate Chen (American Economic Review, 2013)’s hypothesis that future tense marking makes the future more distant than the present. They suggest that linguistic structure affects terms of loan contracts.

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  • Godlewski, Christophe & Weill, Laurent, 2021. "Are loans cheaper when tomorrow seems further?," Economic Modelling, Elsevier, vol. 94(C), pages 1058-1065.
    • Handle: RePEc:eee:ecmode:v:94:y:2021:i:c:p:1058-1065
    DOI: 10.1016/j.econmod.2020.02.046
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    Cited by:

    1. Astghik Mavisakalyan & Yashar Tarverdi & Clas Weber, 2022. "Heaven can wait: future tense and religiosity," Journal of Population Economics, Springer;European Society for Population Economics, vol. 35(3), pages 833-860, July.
    2. Mavisakalyan, Astghik & Tarverdi, Yashar & Weber, Clas, 2020. "Paradise Postponed: Future Tense and Religiosity," GLO Discussion Paper Series 500, Global Labor Organization (GLO).
    3. Ashraf, Badar Nadeem & Qian, Ningyu & Shen, Yinjie (Victor), 2021. "The impact of trade and financial openness on bank loan pricing: Evidence from emerging economies," Emerging Markets Review, Elsevier, vol. 47(C).

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    More about this item

    Keywords

    Language; Bank; Loans;
    All these keywords.

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

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