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Bank Capital Requirements, Loan Guarantees and Firm Performance

Sergio Mayordomo (), Antonio Moreno, Steven Ongena and Maria Rodriguez-Moreno ()
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Antonio Moreno: School of Economics and Business, University of Navarra
Steven Ongena: University of Zurich - Department of Banking and Finance; Swiss Finance Institute; KU Leuven; Centre for Economic Policy Research (CEPR)

No 19-28, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

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; Real Guarantees; Personal Guarantees; Risk Taking; Capital Requirements (search for similar items in EconPapers)
JEL-codes: D43 E32 G21 G32 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2019-06, Revised 2019-06
New Economics Papers: this item is included in nep-ban, nep-bec, nep-cfn, nep-mac and nep-rmg
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