Patents as loan collateral: Evidence from China

Lisheng Yu, Yanyan Wang, Yangyang Yu and Rui Xu

Pacific-Basin Finance Journal, 2025, vol. 93, issue C

Abstract: Using hand-collected loan-level data from China, this study provides novel evidence on the use of patents as loan collateral. We examine how patent quality affects the likelihood and terms of patent-backed lending by alleviating information frictions inherent in patent valuation. Our results show that patent quality is positively associated with the likelihood of using patents as collateral. We also find that higher-quality patents are associated with larger loan amounts, longer maturities, and lower interest rates. Furthermore, we find that banks tend to extend more credit, both in volume and maturity, to firms using patents as collateral compared to those using non-patent collateral. These findings suggest that patent-backed lending not only reflects the value of innovation but also has a positive spillover effect on banks' lending decisions. Overall, our results demonstrate the importance of intellectual property quality in shaping debt financing in emerging markets.

Keywords: Patent quality; Patent collateral; Bank loan decision; Spillover effect (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:93:y:2025:i:c:s0927538x25001398

DOI: 10.1016/j.pacfin.2025.102802

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