IDEAS home Printed from https://ideas.repec.org/p/hal/journl/hal-02500459.html
   My bibliography  Save this paper

Are Loans Cheaper when Tomorrow seems Further ?

Author

Listed:
  • Christophe Godlewski

    (LARGE - Laboratoire de Recherche en Gestion et Economie - UNISTRA - Université de Strasbourg)

  • Laurent Weill

    (LARGE - Laboratoire de Recherche en Gestion et Economie - UNISTRA - Université de Strasbourg)

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. JEL Codes: D83, G20, G41, Z13.

Suggested Citation

  • Christophe Godlewski & Laurent Weill, 2020. "Are Loans Cheaper when Tomorrow seems Further ?," Post-Print hal-02500459, HAL.
    • Handle: RePEc:hal:journl:hal-02500459
    DOI: 10.1016/j.econmod.2020.02.046
    Note: View the original document on HAL open archive server: https://hal.science/hal-02500459
    as

    Download full text from publisher

    File URL: https://hal.science/hal-02500459/document
    Download Restriction: no
    File URL: https://libkey.io/10.1016/j.econmod.2020.02.046?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Kee‐Hong Bae & Vidhan K. Goyal, 2009. "Creditor Rights, Enforcement, and Bank Loans," Journal of Finance, American Finance Association, vol. 64(2), pages 823-860, April.
    2. Chen, Shimin & Cronqvist, Henrik & Ni, Serene & Zhang, Frank, 2017. "Languages and corporate savings behavior," Journal of Corporate Finance, Elsevier, vol. 46(C), pages 320-341.
    3. Victor Ginsburgh & Shlomo Weber, 2020. "The Economics of Language," Journal of Economic Literature, American Economic Association, vol. 58(2), pages 348-404, June.
    4. repec:zbw:bofrdp:2014_003 is not listed on IDEAS
    5. Allen N. Berger & Marco A. Espinosa‐Vega & W. Scott Frame & Nathan H. Miller, 2005. "Debt Maturity, Risk, and Asymmetric Information," Journal of Finance, American Finance Association, vol. 60(6), pages 2895-2923, December.
    6. Astghik Mavisakalyan, 2015. "Gender in Language and Gender in Employment," Oxford Development Studies, Taylor & Francis Journals, vol. 43(4), pages 403-424, December.
    7. de Haan,Jakob & Oosterloo,Sander & Schoenmaker,Dirk, 2012. "Financial Markets and Institutions," Cambridge Books, Cambridge University Press, number 9781107635920, November.
    8. Jimenez, Gabriel & Saurina, Jesus, 2004. "Collateral, type of lender and relationship banking as determinants of credit risk," Journal of Banking & Finance, Elsevier, vol. 28(9), pages 2191-2212, September.
    9. Gomes, Armando & Phillips, Gordon, 2012. "Why do public firms issue private and public securities?," Journal of Financial Intermediation, Elsevier, vol. 21(4), pages 619-658.
    10. repec:zbw:bofrdp:2017_018 is not listed on IDEAS
    11. Jimenez, Gabriel & Salas, Vicente & Saurina, Jesus, 2006. "Determinants of collateral," Journal of Financial Economics, Elsevier, vol. 81(2), pages 255-281, August.
    12. Davis, Lewis S. & Abdurazokzoda, Farangis, 2016. "Language, culture and institutions: Evidence from a new linguistic dataset," Journal of Comparative Economics, Elsevier, vol. 44(3), pages 541-561.
    13. Scott R. Baker & Nicholas Bloom & Steven J. Davis, 2016. "Measuring Economic Policy Uncertainty," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 131(4), pages 1593-1636.
    14. Hasan, Iftekhar & Hoi, Chun Keung & Wu, Qiang & Zhang, Hao, 2017. "Social Capital and Debt Contracting: Evidence from Bank Loans and Public Bonds," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 52(3), pages 1017-1047, June.
    15. Jun Qian & Philip E. Strahan, 2007. "How Laws and Institutions Shape Financial Contracts: The Case of Bank Loans," Journal of Finance, American Finance Association, vol. 62(6), pages 2803-2834, December.
    16. Hasan, Iftekhar & Hoi, Chun Keung (Stan) & Wu, Qiang & Zhang, Hao, 2014. "Beauty is in the eye of the beholder: The effect of corporate tax avoidance on the cost of bank loans," Journal of Financial Economics, Elsevier, vol. 113(1), pages 109-130.
    17. Manthos D. Delis & Iftekhar Hasan & Nikolaos Mylonidis, 2017. "The Risk‐Taking Channel of Monetary Policy in the U.S.: Evidence from Corporate Loan Data," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 49(1), pages 187-213, February.
    18. Waisman, Maya, 2013. "Product market competition and the cost of bank loans: Evidence from state antitakeover laws," Journal of Banking & Finance, Elsevier, vol. 37(12), pages 4721-4737.
    19. repec:cup:cbooks:9781107025943 is not listed on IDEAS
    20. Mavisakalyan, Astghik & Tarverdi, Yashar & Weber, Clas, 2018. "Talking in the present, caring for the future: Language and environment," Journal of Comparative Economics, Elsevier, vol. 46(4), pages 1370-1387.
    21. Berger, Allen N. & Udell, Gregory F., 1990. "Collateral, loan quality and bank risk," Journal of Monetary Economics, Elsevier, vol. 25(1), pages 21-42, January.
    22. Mariassunta Giannetti & Yishay Yafeh, 2012. "Do Cultural Differences Between Contracting Parties Matter? Evidence from Syndicated Bank Loans," Management Science, INFORMS, vol. 58(2), pages 365-383, February.
    23. M. Keith Chen, 2013. "The Effect of Language on Economic Behavior: Evidence from Savings Rates, Health Behaviors, and Retirement Assets," American Economic Review, American Economic Association, vol. 103(2), pages 690-731, April.
    24. Astghik Mavisakalyan & Clas Weber, 2018. "Linguistic Structures And Economic Outcomes," Journal of Economic Surveys, Wiley Blackwell, vol. 32(3), pages 916-939, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. 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).
    2. 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.
    3. Mavisakalyan, Astghik & Tarverdi, Yashar & Weber, Clas, 2020. "Paradise Postponed: Future Tense and Religiosity," GLO Discussion Paper Series 500, Global Labor Organization (GLO).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Mavisakalyan, Astghik & Tarverdi, Yashar & Weber, Clas, 2020. "Paradise Postponed: Future Tense and Religiosity," GLO Discussion Paper Series 500, Global Labor Organization (GLO).
    2. Yin-Siang Huang & Iftekhar Hasan & Ying-Chen Huang & Chih-Yung Lin, 2021. "Political Uncertainty and Bank Loan Contracts: Does Government Quality Matter?," Journal of Financial Services Research, Springer;Western Finance Association, vol. 60(2), pages 157-185, December.
    3. Allen N. Berger & Tanakorn Makaew & Raluca Roman, 2015. "Did bank borrowers benefit from the TARP program : the effects of TARP on loan contract terms," Research Working Paper RWP 15-11, Federal Reserve Bank of Kansas City.
    4. Zhang, Zhi & Zhang, Di & Jiang, Senyang & Li, Ao & Yu, Wei, 2023. "The effect of language on IPO underpricing: Evidence from a multinational research," International Review of Financial Analysis, Elsevier, vol. 89(C).
    5. Francis Osei-Tutu & Laurent Weill, 2021. "How language shapes bank risk taking," Journal of Financial Services Research, Springer;Western Finance Association, vol. 59(1), pages 47-68, April.
    6. Chia-Ying Chan & Iftekhar Hasan & Chih-Yung Lin, 2021. "Agency cost of CEO perquisites in bank loan contracts," Review of Quantitative Finance and Accounting, Springer, vol. 56(4), pages 1221-1258, May.
    7. Christophe J. GODLEWSKI & Bulat SANDITOV, 2020. "Private debt renegotiation and financial institutions' network," Working Papers of LaRGE Research Center 2020-01, Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg.
    8. Godlewski, Christophe J., 2020. "How legal and institutional environments shape the private debt renegotiation process?," Journal of Corporate Finance, Elsevier, vol. 62(C).
    9. Christophe J. GODLEWSKI, 2017. "Initial conditions and the private debt renegotiation process," Working Papers of LaRGE Research Center 2017-03, Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg.
    10. Christophe J. Godlewski, 2019. "Debt Renegotiation and the Design of Financial Contracts," Journal of Financial Services Research, Springer;Western Finance Association, vol. 55(2), pages 191-215, June.
    11. Roman, Raluca A., 2020. "Winners and losers from supervisory enforcement actions against banks," Journal of Corporate Finance, Elsevier, vol. 60(C).
    12. 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.
    13. Gang Wang & Yi Shen, 2023. "Did quantitative easing reduce the borrowing costs of firms? The risk‐taking channel," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 63(1), pages 507-536, March.
    14. Summerville, Karoline M. & Chen, Victor Zitian & Shoham, Amir & Taras, Vasyl, 2024. "Speaking of diversity: Can linguistic structural differences explain cultural values toward equity, diversity, and inclusion across the globe?," Journal of World Business, Elsevier, vol. 59(1).
    15. Ge, Wenxia & Kim, Jeong-Bon & Li, Tiemei & Li, Yutao, 2016. "Offshore operations and bank loan contracting: Evidence from firms that set up subsidiaries in offshore financial centers," Journal of Corporate Finance, Elsevier, vol. 37(C), pages 335-355.
    16. Bing Xu & Honglin Wang & Adrian Van Rixtel, 2015. "Do banks extract informational rents through collateral?," BIS Working Papers 522, Bank for International Settlements.
    17. Calomiris, Charles W. & Larrain, Mauricio & Liberti, José & Sturgess, Jason, 2017. "How collateral laws shape lending and sectoral activity," Journal of Financial Economics, Elsevier, vol. 123(1), pages 163-188.
    18. Godlewski, Christophe J. & Weill, Laurent, 2008. "Syndicated loans in emerging markets," Emerging Markets Review, Elsevier, vol. 9(3), pages 206-219, September.
    19. Graham, John R. & Li, Si & Qiu, Jiaping, 2008. "Corporate misreporting and bank loan contracting," Journal of Financial Economics, Elsevier, vol. 89(1), pages 44-61, July.
    20. Gong, Di & Jiang, Tao & Li, Zhao & Wu, Weixing, 2022. "Optimal loan contracting under policy uncertainty: Theory and international evidence," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 77(C).

    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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hal:journl:hal-02500459. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CCSD (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.