Borrower Heterogeneity and the (Ir)Rational Demand for Short-Term Credit

David M. Becker; Lena Jaroszek; Martin Weber

Borrower Heterogeneity and the (Ir)Rational Demand for Short-Term Credit

David M. Becker, Lena Jaroszek, Martin Weber

Department of Finance

University of Mannheim

Research output: Contribution to conference › Paper › Research

Abstract

Short-term credit serves bridging short-term liquidity gaps. Instead, short-term credit is often used over an extended period of time. Such behavior could stem from individuals’ preference for immediate consumption. We thus analyze, whether short-term credit usage, specifically overdraft usage, is related to time preferences. Combining bank account data with survey responses provides us with evidence that individuals with higher implied discount rates use overdrafts more frequently. We disentangle a normative and a behavioral explanation. Our results are consistent with the existence of self-control problems in the form of present-biased
time preference.

Original language	English
Publication date	2017
Number of pages	66
Publication status	Published - 2017
Event	Young Scholars Nordic Finance Workshop 2017 - Aarhus University, Aarhus, Denmark Duration: 23 Nov 2017 → 24 Nov 2017 http://econ.au.dk/facultyandstaff/sections/accounting-and-finance/young-scholars-nordic-finance-workshop/

Conference

Conference	Young Scholars Nordic Finance Workshop 2017
Location	Aarhus University
Country/Territory	Denmark
City	Aarhus
Period	23/11/2017 → 24/11/2017
Internet address	http://econ.au.dk/facultyandstaff/sections/accounting-and-finance/young-scholars-nordic-finance-workshop/

Keywords

Consumer debt
Credit lines
Impatience
Impulsiveness
Overdrafts

Access to Document

http://econ.au.dk/fileadmin/Economics_Business/Research/Accounting_and_Finance_Section/NFN_papers/Borrower_Heterogeneity_and_the__Ir_Rational_Demand_for_Short-Term_Credit.pdfLicence: Unspecified

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Cite this

Becker, D. M., Jaroszek, L., & Weber, M. (2017). Borrower Heterogeneity and the (Ir)Rational Demand for Short-Term Credit. Paper presented at Young Scholars Nordic Finance Workshop 2017, Aarhus, Denmark. http://econ.au.dk/fileadmin/Economics_Business/Research/Accounting_and_Finance_Section/NFN_papers/Borrower_Heterogeneity_and_the__Ir_Rational_Demand_for_Short-Term_Credit.pdf

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abstract = "Short-term credit serves bridging short-term liquidity gaps. Instead, short-term credit is often used over an extended period of time. Such behavior could stem from individuals{\textquoteright} preference for immediate consumption. We thus analyze, whether short-term credit usage, specifically overdraft usage, is related to time preferences. Combining bank account data with survey responses provides us with evidence that individuals with higher implied discount rates use overdrafts more frequently. We disentangle a normative and a behavioral explanation. Our results are consistent with the existence of self-control problems in the form of present-biasedtime preference. ",

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Becker, DM, Jaroszek, L & Weber, M 2017, 'Borrower Heterogeneity and the (Ir)Rational Demand for Short-Term Credit', Paper presented at Young Scholars Nordic Finance Workshop 2017, Aarhus, Denmark, 23/11/2017 - 24/11/2017. <http://econ.au.dk/fileadmin/Economics_Business/Research/Accounting_and_Finance_Section/NFN_papers/Borrower_Heterogeneity_and_the__Ir_Rational_Demand_for_Short-Term_Credit.pdf>

TY - CONF

T1 - Borrower Heterogeneity and the (Ir)Rational Demand for Short-Term Credit

AU - Becker, David M.

AU - Jaroszek, Lena

AU - Weber, Martin

PY - 2017

Y1 - 2017

N2 - Short-term credit serves bridging short-term liquidity gaps. Instead, short-term credit is often used over an extended period of time. Such behavior could stem from individuals’ preference for immediate consumption. We thus analyze, whether short-term credit usage, specifically overdraft usage, is related to time preferences. Combining bank account data with survey responses provides us with evidence that individuals with higher implied discount rates use overdrafts more frequently. We disentangle a normative and a behavioral explanation. Our results are consistent with the existence of self-control problems in the form of present-biasedtime preference.

AB - Short-term credit serves bridging short-term liquidity gaps. Instead, short-term credit is often used over an extended period of time. Such behavior could stem from individuals’ preference for immediate consumption. We thus analyze, whether short-term credit usage, specifically overdraft usage, is related to time preferences. Combining bank account data with survey responses provides us with evidence that individuals with higher implied discount rates use overdrafts more frequently. We disentangle a normative and a behavioral explanation. Our results are consistent with the existence of self-control problems in the form of present-biasedtime preference.

KW - Consumer debt

KW - Credit lines

KW - Impatience

KW - Impulsiveness

KW - Overdrafts

M3 - Paper

T2 - Young Scholars Nordic Finance Workshop 2017

Y2 - 23 November 2017 through 24 November 2017

ER -