کد مقاله | کد نشریه | سال انتشار | مقاله انگلیسی | نسخه تمام متن |
---|---|---|---|---|
983615 | 1480483 | 2006 | 15 صفحه PDF | دانلود رایگان |
This paper proposes that the timing for when collateral is pledged will affect the lenders’ incentives to resolve financial distress. It demonstrates that, if the amount of collateral pledged in a loan contract exceeds a critical value, the borrower's project may be inefficiently liquidated once he becomes financially distressed. It also shows that a fairly priced loan guarantee provided by a third party can partially alleviate this inefficient liquidation problem. This paper predicts that riskier borrowers will pledge more collateral, which is consistent with the empirical findings of Berger and Udell [Berger, A. N., & Udell, G. F. (1990). Collateral, loan quality, and bank risk. Journal of Monetary Economics, 25, 21–42] and Leeth and Scott [Leeth, J. D., & Scott, J. A. (1989). The incidence of secured debt: evidence from the small business community. Journal of Financial and Quantitative Analysis, 24, 379–394].
Journal: The Quarterly Review of Economics and Finance - Volume 46, Issue 1, February 2006, Pages 1–15