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Impacts of Chapter 12 and Lender Liability Suits on Bankers' Propensity to Lend in Western Arkansas

Published online by Cambridge University Press:  28 April 2015

Bruce L. Dixon ,
Kristin M. Raub  and
Janet A. Flaccus
Bruce L. Dixon
Affiliation:
University of Arkansas, Fayetteville, Arkansas
Kristin M. Raub
Affiliation:
University of Arkansas, Fayetteville, Arkansas Strategic Agricultural Management Corporation, Memphis, Tennessee
Janet A. Flaccus
Affiliation:
Strategic Agricultural Management Corporation, Memphis, Tennessee
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Abstract

The recent availability of Chapter 12 bankruptcy and the more frequent use of lender liability suits by borrowers are factors that may be adversely affecting the supply of agricultural loans. An experiment using hypothetical loan applications was undertaken involving 34 banks in western Arkansas. Responses were used to estimate the impacts of these legal procedures on banks' lending behavior. The estimated models indicate Chapter 12 is not a significant factor in the loan approval process. Lender liability has marginal significance in lowering the probability of granting an intermediate term loan.

Keywords

Chapter 12lender liabilitylender surveylimited dependent variablesloan approval
Type
Articles
Information
Journal of Agricultural and Applied Economics , Volume 25 , Issue 1 , July 1993 , pp. 174 - 186
Copyright
Copyright © Southern Agricultural Economics Association 1993

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