On the Use of Collateral

Giuseppe Coco

Discussion Papers from University of Exeter, Department of Economics

Abstract: This paper surveys existing explanations for the use of collateral in credit markets and relates them to the empirical evidence on the subject. Collateral may be used as a screening or an incentive device in markets characterized by various forms of asymmetric and biased information. The evidence is incompatible with the use of collateral as a signal of projects' quality, while broadly consistent with explanations based on its incentive properties and asymmetric evaluation of projects.

Keywords: CREDIT; CREDIT SYSTEMS; INFORMATION; CREDIT POLICY; RATIONING 4RJ. 28p. (search for similar items in EconPapers)
JEL-codes: D82 G14 (search for similar items in EconPapers)
Date: 1998
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Citations: View citations in EconPapers (52)

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Journal Article: On the Use of Collateral (2000)
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Persistent link: https://EconPapers.repec.org/RePEc:exe:wpaper:9805

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