The Law and Economics Debate About Secured Lending: Lessons for European Lawmaking?

European Company and Financial Law Review, Vol. 5

31 Pages Posted: 9 Apr 2008

See all articles by John Armour

John Armour

University of Oxford - Faculty of Law; University of Oxford - Said Business School; European Corporate Governance Institute (ECGI)

Abstract

This review paper is a contribution to a symposium on the 'Future of Secured Credit in Europe'. Its theme is the way in which empirical research has shed light on earlier theoretical literature. These findings tend to suggest that the legal institution of secured credit is, on the whole, socially beneficial, and that such benefits are likely to outweigh any associated social costs. Having made this general claim, the paper then turns to consider the effects of four particular dimensions across which systems of secured credit may differ, and which may therefore be of interest to European law-makers. These are: (i) the scope of permissible collateral; (ii) the efficacy of enforcement; (iii) the priority treatment of secured creditors; and (iv) the mechanisms employed to assist third parties in discovering that security has been granted. In each case, consideration is paid first to the theoretical position, and then empirical findings. It is argued that perhaps the most difficult of these issues for European law-makers concerns the appropriate design of publicity mechanisms for third parties.

Keywords: secured credit, European corporate finance, notice filing, enforcement, insolvency priorities

JEL Classification: G33, K22

Suggested Citation

Armour, John, The Law and Economics Debate About Secured Lending: Lessons for European Lawmaking?. European Company and Financial Law Review, Vol. 5. Available at SSRN: https://ssrn.com/abstract=1118030

John Armour (Contact Author)

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University of Oxford - Said Business School ( email )

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European Corporate Governance Institute (ECGI) ( email )

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