Collateralization, bank loan rates and monitoring

G. Cerqueiro, S. Ongena, K. Roszbach

Onderzoeksoutput: ArticleAcademicpeer review

74 Citaten (Scopus)
216 Downloads (Pure)


We 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.
Originele taal-2English
Pagina's (van-tot)1295-1322
Aantal pagina's28
TijdschriftJournal of Finance
Nummer van het tijdschrift3
StatusPublished - jun.-2016

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