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Identifier to cite or link to this item: https://hdl.handle.net/10086/27317

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Title
How Collateral Laws Shape Lending and Sectoral Activity
Creator
Creator Name
Calomiris, Charles W. Calomiris, Charles W.
Affiliation
Affiliation Name
Columbia University
Affiliation
Affiliation Name
NBER
Creator Name
Larrain, Mauricio Larrain, Mauricio
Affiliation
Affiliation Name
Columbia University
Creator Name
Liberti, José Liberti, José
Affiliation
Affiliation Name
DePaul University
Creator Name
Sturgess, Jason Sturgess, Jason
Affiliation
Affiliation Name
DePaul University
Abstract
This paper investigates the effect of cross-country differences in collateral laws regarding movable assets on lending and sectoral allocation of resources. Using micro-level loan data for a sample of emerging market countries we show that loan-to-values of loans collateralized with movable assets are on average 21 percentage points higher in countries with strong-collateral laws relative to immovable assets. Further, stronger collateral laws tilt collateral composition away from immovable to movable assets. We also provide evidence of a collateral class, including bank guarantees, for which enforcement is independent of collateral law. To examine the effect of collateral laws on real activity we map the relationship of collateral laws and collateral composition to asset-composition and sectoral resource allocation using industry-level output and employment data. Weak collateralization laws that discourage the use of movables assets as collateral create distortions in the allocation of resources that favor immovable-based production. The results shed light on an important channel – collateral laws – through which legal institutions affect lending and real economic activity.
Description
Preliminary Draft
Publisher
Institute of Economic Research, Hitotsubashi University
Issued Date
2015-06
Language
English(eng)
Resource Type
technical report
Version Type
VoR
Is Part OfRelation -
Related Title
HIT-REFINED Working Paper Series ; No. 20
Relation
Related Identifier
URI
  http://www.ier.hit-u.ac.jp/hit-refined/
Number of Pages
47
Sponsorship
基盤研究(S) = Grants-in-Aid for Scientific Research (S)
Appears in Collections
Working Paper Series / Real Estate Markets, Financial Crisis, and Economic Growth An Integrated Economic Approach
URL
https://hdl.handle.net/10086/27317