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Bank capital requirements, loan guarantees and firm performance

Sergio Mayordomo (), Antonio Moreno (), Steven Ongena and Maria Rodriguez-Moreno ()

Journal of Financial Intermediation, 2021, vol. 45, issue C

Abstract: This paper studies the effects of the bank capital requirements imposed by the European authorities in October 2011 on loan collateral and personal guarantees usage to enhance capital ratios. We use detailed information on the loan contracts granted by a representative Spanish bank and several subsidiaries to nonfinancial corporations around that date. We document that personal guarantees usage increases more than that of collateral, especially at subsidiaries with lower capital ratios. However, although the former type of guarantees demonstrably disciplined firms in their risk-taking before 2011, their subsequent overuse may have blunted their impact and may have even undermined firm performance and investment.

Keywords: Banks; Asymmetric information; Collateral; Personal guarantees; Capital requirements; Risk taking (search for similar items in EconPapers)
JEL-codes: D43 E32 G21 G32 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinin:v:45:y:2021:i:c:s1042957319300336

DOI: 10.1016/j.jfi.2019.05.002

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