Movables as Collateral and Corporate Credit: Loan-Level Evidence from Legal Reforms across Europe

Steven Ongena, Walid Saffar, Yuan Sun and Lai Wei

No 17509, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Does pledging movables as collateral alter corporate borrowing? To answer this question, we study the effect of collateral law reforms on syndicated bank loans granted across nine European countries that facilitated pledging movables between 1995 and 2019, comparing them to nineteen countries that did not. We find that although the reforms have enabled firms to issue more secured loans, the average cost of the loans and the number of covenants has also increased. Banks may demand more to compensate for both the potential wealth redistribution induced by newly issued secured credit and the extra monitoring involved to mitigate concerns about using movables as collateral.

Keywords: Cost of debt; Collateral laws; Access to credit (search for similar items in EconPapers)
JEL-codes: G20 G30 (search for similar items in EconPapers)
Date: 2022-07
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Working Paper: Movables as Collateral and Corporate Credit: Loan-Level Evidence from Legal Reforms across Europe (2022)
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