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  • DILS_20190703

    Rights statement: This is a pre-copy-editing, author-produced PDF of an article accepted for publication in The Review of Corporate Financial Studies following peer review. The definitive publisher-authenticated version Hans Degryse, Vasso Ioannidou, José María Liberti, Jason Sturgess, How Do Laws and Institutions Affect Recovery Rates for Collateral?, The Review of Corporate Finance Studies, Volume 9, Issue 1, March 2020, Pages 1–43, is available online at: https://academic.oup.com/rcfs/article/9/1/1/5658634

    Accepted author manuscript, 906 KB, PDF document

    Embargo ends: 5/06/21

    Available under license: CC BY-NC: Creative Commons Attribution-NonCommercial 4.0 International License

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How Do Laws and Institutions affect Recovery Rates on Collateral?

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<mark>Journal publication date</mark>1/03/2020
<mark>Journal</mark>Review of Corporate Finance Studies
Issue number1
Volume9
Number of pages43
Pages (from-to)1-43
Publication StatusPublished
<mark>Original language</mark>English

Abstract

We show that laws and institutions that strengthen creditor protection increase expected recovery rates on collateral using unique internal bank data on ex-ante appraised liquidation and market values of assets pledged as collateral in 16 countries. Stronger creditor protection increases expected recovery rates on movable collateral relative to immovable collateral and shifts the composition of collateral towards movable assets, which increases debt capacity through both higher loan-to-values and attenuating the creditor’s liquidation bias. Our results suggest that the recovery rate on collateral is an important first-stage mechanism through which creditor protection can improve contracting efficiency and enhance access to credit.

Bibliographic note

This is a pre-copy-editing, author-produced PDF of an article accepted for publication in The Review of Corporate Financial Studies following peer review. The definitive publisher-authenticated version Hans Degryse, Vasso Ioannidou, José María Liberti, Jason Sturgess, How Do Laws and Institutions Affect Recovery Rates for Collateral?, The Review of Corporate Finance Studies, Volume 9, Issue 1, March 2020, Pages 1–43, is available online at: https://academic.oup.com/rcfs/article/9/1/1/5658634