How Collateral Laws Shape Lending and Sectoral Activity
Mauricio Larrain (),
Jose Liberti () and
Jason Sturgess ()
No 21911, NBER Working Papers from National Bureau of Economic Research, Inc
We demonstrate the central importance of creditors’ ability to use “movable” assets as collateral (as distinct from “immovable” real estate) when borrowing from banks. Using a unique cross-country micro-level loan dataset containing loan-to-value ratios for different assets, we find that loan-to-values of loans collateralized with movable assets are lower in countries with weak collateral laws, relative to immovable assets, and that lending is biased towards the use of immovable assets. Using sector-level data, we find that weak movable collateral laws create distortions in the allocation of resources that favor immovable-based production. An analysis of Slovakia’s collateral law reform confirms our findings.
JEL-codes: G18 G21 (search for similar items in EconPapers)
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Published as Calomiris, Charles W. & Larrain, Mauricio & Liberti, José & Sturgess, Jason, 2017. "How collateral laws shape lending and sectoral activity," Journal of Financial Economics, Elsevier, vol. 123(1), pages 163-188.
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Journal Article: How collateral laws shape lending and sectoral activity (2017)
Working Paper: How Collateral Laws Shape Lending and Sectoral Activity (2015)
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