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

David M. Becker, Lena Jaroszek, Martin Weber

Research output: Contribution to conferencePaperResearch

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 languageEnglish
Publication date2017
Number of pages66
Publication statusPublished - 2017
EventYoung Scholars Nordic Finance Workshop 2017 - Aarhus University, Aarhus, Denmark
Duration: 23 Nov 201724 Nov 2017
http://econ.au.dk/facultyandstaff/sections/accounting-and-finance/young-scholars-nordic-finance-workshop/

Conference

ConferenceYoung Scholars Nordic Finance Workshop 2017
LocationAarhus University
CountryDenmark
CityAarhus
Period23/11/201724/11/2017
Internet address

Keywords

  • Consumer debt
  • Credit lines
  • Impatience
  • Impulsiveness
  • Overdrafts

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.
Becker, David M. ; Jaroszek, Lena ; Weber, Martin. / Borrower Heterogeneity and the (Ir)Rational Demand for Short-Term Credit. Paper presented at Young Scholars Nordic Finance Workshop 2017, Aarhus, Denmark.66 p.
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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’ 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, Aarhus, Denmark, 23/11/2017 - 24/11/2017, .

Borrower Heterogeneity and the (Ir)Rational Demand for Short-Term Credit. / Becker, David M.; Jaroszek, Lena; Weber, Martin.

2017. Paper presented at Young Scholars Nordic Finance Workshop 2017, Aarhus, Denmark.

Research output: Contribution to conferencePaperResearch

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

ER -

Becker DM, Jaroszek L, Weber M. Borrower Heterogeneity and the (Ir)Rational Demand for Short-Term Credit. 2017. Paper presented at Young Scholars Nordic Finance Workshop 2017, Aarhus, Denmark.