Abstract

http://ssrn.com/abstract=637501
 
 

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Do Liquidation Values Affect Financial Contracts? Evidence from Commercial Loan Contracts and Zoning Regulation


Effi Benmelech


Harvard University - Department of Economics; National Bureau of Economic Research (NBER)

Tobias J. Moskowitz


University of Chicago - Booth School of Business

Mark J. Garmaise


University of California, Los Angeles (UCLA) - Anderson School of Management

December 2004

NBER Working Paper No. w11004

Abstract:     
We examine the impact of asset liquidation value on debt contracting using a unique set of commercial property non-recourse loan contracts. We employ commercial zoning regulation to capture the flexibility of a property's permitted uses as a measure of an asset's redeployability or value in its next best use. Within a census tract, more redeployable assets receive larger loans with longer maturities and durations, lower interest rates, and fewer creditors, controlling for the current value of the property, its type, and neighborhood. These results are consistent with incomplete contracting and transaction cost theories of liquidation value and financial structure.

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Date posted: January 20, 2005  

Suggested Citation

Benmelech, Effi and Moskowitz, Tobias J. and Garmaise, Mark J., Do Liquidation Values Affect Financial Contracts? Evidence from Commercial Loan Contracts and Zoning Regulation (December 2004). NBER Working Paper No. w11004. Available at SSRN: http://ssrn.com/abstract=637501

Contact Information

Efraim Benmelech
Harvard University - Department of Economics ( email )
Littauer Center
Cambridge, MA 02138
United States
617-496-4787 (Phone)
617-495-8570 (Fax)
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Tobias J. Moskowitz (Contact Author)
University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-834-2757 (Phone)
773-702-0458 (Fax)
Mark J. Garmaise
University of California, Los Angeles (UCLA) - Anderson School of Management ( email )
110 Westwood Plaza
Los Angeles, CA 90095-1481
United States
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