45 Pages Posted: 22 Nov 2013 Last revised: 16 Nov 2015
Date Written: November 12, 2015
Recent reforms across Eastern European countries have given more flexibility and information to parties to engage in secured debt transactions. The menu of assets legally accepted as collateral was enlarged to include movable assets (e.g., machinery and equipment). Generalized difference-in-differences tests show that firms operating more movable assets borrowed more as a result. Those firms also invested more, hired more, and became more efficient and profitable following the changes in the contracting environment. The financial deepening we document triggered important reallocation effects: firms affected by the reforms increased their share of fixed assets and employment in the economy.
Keywords: Contractibility, collateral, capital structure, credit availability, real activity
JEL Classification: G32, K22, O16
Suggested Citation: Suggested Citation
Campello, Murillo and Larrain, Mauricio, Enlarging the Contracting Space: Collateral Menus, Access to Credit, and Economic Activity (November 12, 2015). Forthcoming, Review of Financial Studies. Available at SSRN: https://ssrn.com/abstract=2358183