Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/210157 
Year of Publication: 
2019
Series/Report no.: 
Working Paper No. 9/2019
Publisher: 
Norges Bank, Oslo
Abstract: 
A unique legal reform in 2004 in Sweden redistributed collateral rights from banks holding floating liens to unsecured creditors without changing the value of assets on firms' balance sheets. Using a country-wide panel of all incorporated firms, we document that a zero-sum redistribution of collateral rights and the resulting reduction in collateral capacity towards banks contracts the amount and maturity of corporate debt and leads firms to slow investment and forego growth. Altering their allocation of assets, firms reduce particularly those assets with a low collateralizable value for banks and also hoard more cash. However, the reform has no impact on corporate capital intensity or efficiency, suggesting that under these newly binding credit constraints firms simply shrink their operations
Subjects: 
collateral
investment
financial constraints
difference-in-differences
floating lien
seniority
JEL: 
D22
G31
G32
Persistent Identifier of the first edition: 
ISBN: 
978-82-8379-100-6
Creative Commons License: 
cc-by-nc-nd Logo
Document Type: 
Working Paper
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