Enlarging the Contracting Space: Collateral Menus, Access to Credit, and Economic Activity

44 Pages Posted: 2 Nov 2015 Last revised: 1 Dec 2015

See all articles by Murillo Campello

Murillo Campello

Cornell University - Samuel Curtis Johnson Graduate School of Management; National Bureau of Economic Research (NBER)

Mauricio Larrain

Columbia University

Date Written: October 2015

Abstract

Recent reforms across Eastern European countries gave more flexibility and information for 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 of such reforms. 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.

Suggested Citation

Campello, Murillo and Larrain, Mauricio, Enlarging the Contracting Space: Collateral Menus, Access to Credit, and Economic Activity (October 2015). NBER Working Paper No. w21690. Available at SSRN: https://ssrn.com/abstract=2684994

Murillo Campello (Contact Author)

Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )

114 East Avenue
369 Sage Hall
Ithaca, NY 14853
United States

HOME PAGE: http://www.johnson.cornell.edu/Faculty-And-Research/Profile.aspx?id=mnc35

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138

Mauricio Larrain

Columbia University ( email )

3022 Broadway
New York, NY 10027
United States

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