How Do Laws and Institutions affect Recovery Rates on Collateral?

Degryse, Hans and Ioannidou, Vasso and Liberti, Jose and Sturgess, Jason (2020) How Do Laws and Institutions affect Recovery Rates on Collateral? Review of Corporate Finance Studies, 9 (1). pp. 1-43.

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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.

Item Type:
Journal Article
Journal or Publication Title:
Review of Corporate Finance Studies
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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:
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06 Aug 2019 10:25
Last Modified:
05 Jun 2024 00:40