Rights statement: This is a pre-copy-editing, author-produced PDF of an article accepted for publication in Review of Corporate Finance 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, https://doi.org/10.1093/rcfs/cfz011 is available online at: https://academic.oup.com/rcfs/article/9/1/1/5658634
Accepted author manuscript, 557 KB, PDF document
Available under license: CC BY-NC: Creative Commons Attribution-NonCommercial 4.0 International License
Final published version
Research output: Contribution to Journal/Magazine › Journal article › peer-review
| <mark>Journal publication date</mark> | 1/03/2020 |
|---|---|
| <mark>Journal</mark> | Review of Corporate Finance Studies |
| Issue number | 1 |
| Volume | 9 |
| Number of pages | 43 |
| Pages (from-to) | 1-43 |
| Publication Status | Published |
| Early online date | 5/12/19 |
| <mark>Original language</mark> | English |
Using unique internal bank data on ex ante appraised liquidation and market values of assets pledged as collateral in sixteen countries, we show that laws and institutions that strengthen creditor protection increase expected recovery rates for collateral. Stronger creditor protection increases expected recovery rates for movable collateral relative to immovable collateral and shifts the composition of collateral toward movable assets, thereby increasing debt capacity through both higher loan-to-values and attenuating the creditor's liquidation bias. Our results suggest that the recovery rate for collateral is an important first-stage mechanism through which creditor protection can improve contracting efficiency and enhance access to credit. Received September 17, 2018; editorial decision July 9, 2019 by Editor Andrew Ellul.