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Contribution Details
| Type | Journal Article |
| Scope | Discipline-based scholarship |
| Title | Collateralization, bank loan rates, and monitoring |
| Organization Unit | |
| Authors |
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| Item Subtype | Original Work |
| Refereed | Yes |
| Status | Published in final form |
| Language |
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| Journal Title | Journal of Finance |
| Publisher | Wiley-Blackwell Publishing, Inc. |
| Geographical Reach | international |
| ISSN | 0022-1082 |
| Volume | 71 |
| Number | 3 |
| Page Range | 1295 - 1322 |
| Date | 2016 |
| Abstract Text | We show that collateral plays an important role in the design of debt contracts, the provision of credit, and the incentives of lenders to monitor borrowers. Using a unique data set from a large bank containing timely assessments of collateral values, we find that the bank responded to a legal reform that exogenously reduced collateral values by increasing interest rates, tightening credit limits, and reducing the intensity of its monitoring of borrowers and collateral, spurring borrower delinquency on outstanding claims. We thus explain why banks are senior lenders and quantify the value of claimant priority. |
| Free access at | Related URL |
| Related URLs |
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| Digital Object Identifier | 10.1111/jofi.12214 |
| Other Identification Number | merlin-id:9198 |
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