journal article May 11, 2016

Collateralization, Bank Loan Rates, and Monitoring

The Journal of Finance Vol. 71 No. 3 pp. 1295-1322 · Wiley
View at Publisher Save 10.1111/jofi.12214
Abstract
ABSTRACTWe show that collateral plays an important role in the design of debt contracts, the provision of credit, and the incentives of lenders to monitor borrowers. Using a unique data set from a large bank containing timely assessments of collateral values, we find that the bank responded to a legal reform that exogenously reduced collateral values by increasing interest rates, tightening credit limits, and reducing the intensity of its monitoring of borrowers and collateral, spurring borrower delinquency on outstanding claims. We thus explain why banks are senior lenders and quantify the value of claimant priority.
Topics

No keywords indexed for this article. Browse by subject →

References
61
[2]
Argentiero Amedeo 2009 Some new evidence on the role of collateral: Lazy banks or diligent banks?Working paper 113 Institute for Studies and Economic Analyses.
[13]
Bernanke Ben S. "Agency costs, net worth, and business fluctuations" American Economic Review (1989)
[15]
Bester Helmut "Screening vs. rationing in credit markets with imperfect information" American Economic Review (1985)
[22]
Degryse Hans VassoIoannidou andErik L.Von Schedvin 2013 On the non‐exclusivity of loan contracts: An empirical investigation Discussion Paper 8692 Centre for Economic Policy Research. 10.2139/ssrn.2091185
[31]
Freixas Xavier (2008)

Showing 50 of 61 references

Cited By
245
Does Forward-Looking Accounting Improve Bank Asset Quality?

Sherif Elashmawy, Juha-Pekka Kallunki · 2025

Accounting in Europe
The Valuation of Collateral in Bank Lending

Stephan Luck, João A. C. Santos · 2023

The Journal of Financial and Quanti...
Metrics
245
Citations
61
References
Details
Published
May 11, 2016
Vol/Issue
71(3)
Pages
1295-1322
License
View
Cite This Article
GERALDO CERQUEIRO, Steven Ongena, KASPER ROSZBACH (2016). Collateralization, Bank Loan Rates, and Monitoring. The Journal of Finance, 71(3), 1295-1322. https://doi.org/10.1111/jofi.12214
Related

You May Also Like

On Persistence in Mutual Fund Performance

Mark M. Carhart · 1997

16,798 citations

A Survey of Corporate Governance

Andrei Shleifer, ROBERT W. VISHNY · 1997

16,070 citations