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Bank liability guarantee schemes have traditionally been viewed as costless measures to shore up investor confidence and stave off bank runs. However, as the experience of some European countries, most notably Ireland, has demonstrated, the credibility and effectiveness of these guarantees is...
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An important theoretical literature motivates collateral as a mechanism that mitigates adverse selection, credit … incidence of collateral. We exploit exogenous variation in lender information related to the adoption of an information … technology that reduces ex ante private information, and compare collateral outcomes before and after adoption. Our results are …
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tend not to face higher interest rates because they provide collateral. This paper illustrates these effects in a model and …
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of collateral. The results highlight some interesting nuances which are not characteristic of the properties of models … be negatively related to an entrepreneur.s initial wealth. Our model shows that banks can use collateral as a means of … of raising the amount of the debt that is effectively securitized through borrower collateral. Thus, through this …
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