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Identifier to cite or link to this item: https://hdl.handle.net/10086/18925

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Title	The Effects of Collateral on Firm Performance
Creator	Creator Name Ono, Arito Ono, Arito Affiliation Affiliation Name Bank of Japan
	Creator Name Sakai, Koji Sakai, Koji 坂井, 功治坂井, 功治 Affiliation Affiliation Name Kyoto Sangyo University
	Creator Name Uesugi, Iichiro Uesugi, Iichiro 植杉, 威一郎植杉, 威一郎 Affiliation Affiliation Name Research Institute of Economy, Trade and Industry Affiliation Affiliation Name Hitotsubashi University
Editor	Contributor Name 持続的成長を可能にする産業・金融ネットワークの設計 = Design of industry and financial network where sustained growth is enabled
Editor	Contributor Name Institute of Economic Research, Hitotsubashi University
Key Word	collateral
	moral hazard
	propensity score
JEL	D82
	G21
	G30
Abstract	This paper examines how collateral and personal guarantees affect firms’ ex-post performance employing a propensity score matching estimation approach. Based on a unique firm-level panel data set of more than 500 small-and-medium-sized borrower firms in Japan, we find that borrowers that provide collateral to lenders experience larger increases in profitability and reductions in riskiness than borrowers that do not. The main channel through which the borrower enhances its profitability is cost-cutting restructuring. These findings are consistent with the hypothesis that collateral reduces moral hazard by providing borrowers with an incentive to enhance their creditworthiness. We find little evidence that improvements in collateralized firms’ performance are driven by the intensified monitoring on the part of lenders, or by borrowing firms’ access to larger amounts of credit.
Publisher	Institute of Economic Research, Hitotsubashi University
Issued Date	2011-02
Language	English(eng)
Resource Type	technical report
Version Type	VoR
Is Part OfRelation -	Related Title IFN Working Paper ; No. 5
Relation	Related Identifier URI http://www2.ier.hit-u.ac.jp/ifn/
Number of Pages	53
Sponsorship	近未来の課題解決を目指した実証的社会科学推進事業
Appears in Collections	Working Paper Series / Design of industry and financial network where sustained growth is enabled
URL	https://hdl.handle.net/10086/18925