Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/154351
Authors: 
Cerqueiro, Geraldo
Ongena, Steven
Roszbach, Kasper
Year of Publication: 
2016
Series/Report no.: 
ECB Working Paper 1918
Abstract: 
In this paper, we investigate the economy-wide effects of the collateral channel by exploiting: (i) a legal reform in Sweden in 2004 that reduced collateral values, and (ii) a dataset that covers all incorporated firms in Sweden over the period 2000-2006. We find that the loss in collateral value reduces both the amount and the maturity of firm debt and leads firms to contract investment, employment, and assets. The legal reform may distort investment and asset allocation decisions, as firms that reduce their holdings of assets with low collaterizable value and firms that hold more liquid assets consequently become less productive and innovative. Our results therefore document the potency of a collateral channel outside of a crisis.
Subjects: 
collateral
differences-in-differences
financial constraints
floating lien
investment
JEL: 
D22
G31
G32
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-2166-4
Document Type: 
Working Paper

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