Access to Collateral and the Democratization of Credit: France's Reform of the Napoleonic Code

101 Pages Posted: 11 Feb 2016 Last revised: 25 May 2019

See all articles by Kevin Aretz

Kevin Aretz

Alliance Manchester Business School

Murillo Campello

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

Maria‐Teresa Marchica

University of Manchester - Alliance Manchester Business School

Multiple version iconThere are 2 versions of this paper

Date Written: May 20, 2019

Abstract

France's Ordonnance 2006-346 repudiated the notion of possessory ownership in the Napoleonic Code, easing the pledge of physical assets in a country where credit was highly concentrated. Using a differences-test strategy, we show that firms operating newly-pledgeable assets significantly increased their borrowing following the reform. Small, young, and financially constrained businesses benefitted the most, observing improved credit access and real-side outcomes. Start-ups operating newly-pledgeable assets emerged with higher “at-inception” leverage, located farther from large cities, with more assets-in-place than before. Their exit and bankruptcy rates declined. Spatial analyses show that the reform reached firms in rural areas, reducing credit access inequality across France's countryside.

Keywords: Security Laws, Contractibility, Collateral, Capital Structure, Bank Loans, Welfare

JEL Classification: G32, K22, O16

Suggested Citation

Aretz, Kevin and Campello, Murillo and Marchica, Maria‐Teresa, Access to Collateral and the Democratization of Credit: France's Reform of the Napoleonic Code (May 20, 2019). Journal of Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2731043 or http://dx.doi.org/10.2139/ssrn.2731043

Kevin Aretz (Contact Author)

Alliance Manchester Business School ( email )

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Murillo Campello

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

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

National Bureau of Economic Research (NBER) ( email )

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Cambridge, MA 02138

Maria‐Teresa Marchica

University of Manchester - Alliance Manchester Business School ( email )

Booth Street West
Manchester, M15 6PB
United Kingdom

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