Quantifying Reduced-Form Evidence on Collateral Constraints

Sylvain Catherine, Thomas Chaney, Zongbo Huang, David Sraer and David Thesmar
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Sylvain Catherine: University of Pennsylvania
Zongbo Huang: CUHK - The Chinese University of Hong Kong [Hong Kong], Shenzhen University [Shenzhen]
David Thesmar: MIT - Massachusetts Institute of Technology, NBER - National Bureau of Economic Research [New York] - NBER - The National Bureau of Economic Research, CEPR - Center for Economic Policy Research

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Abstract: This paper quantifies the aggregate effects of financing constraints. We start from a standard dynamic investment model with collateral constraints. In contrast to the existing quantitative literature, our estimation does not target the mean leverage ratio to identify the scope of financing frictions. Instead, we use a reduced-form coefficient from the recent corporate finance literature that connects exogenous debt capacity shocks to corporate investment. Relative to a frictionless benchmark, collateral constraints induce losses of 7.1% for output and 1.4% for total factor productivity (TFP) (misallocation). We show these estimated losses tend to be more robust to misspecification than estimates obtained by targeting leverage.

Date: 2022-08
New Economics Papers: this item is included in nep-cfn, nep-eff and nep-fdg
Note: View the original document on HAL open archive server: https://sciencespo.hal.science/hal-03869851v1
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Citations: View citations in EconPapers (5)

Published in Journal of Finance, 2022, 77 (4), pp.2143-2181. ⟨10.1111/jofi.13158⟩

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Related works:
Journal Article: Quantifying Reduced‐Form Evidence on Collateral Constraints (2022)
Working Paper: Quantifying Reduced-Form Evidence on Collateral Constraints (2022)
Working Paper: Quantifying Reduced-Form Evidence on Collateral Constraints (2018)
Working Paper: Quantifying Reduced-Form Evidence on Collateral Constraints (2018)
Working Paper: Quantifying Reduced-Form Evidence on Collateral Constraints (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03869851

DOI: 10.1111/jofi.13158

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