NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Enlarging the Contracting Space: Collateral Menus, Access to Credit, and Economic Activity

Murillo Campello, Mauricio Larrain

NBER Working Paper No. 21690
Issued in October 2015
NBER Program(s):   CF   DEV   IFM   LE

Recent reforms across Eastern European countries gave more flexibility and information for parties to engage in secured debt transactions. The menu of assets legally accepted as collateral was enlarged to include movable assets (e.g., machinery and equipment). Generalized difference-in-differences tests show that firms operating more movable assets borrowed more as a result of such reforms. Those firms also invested more, hired more, and became more efficient and profitable following the changes in the contracting environment. The financial deepening we document triggered important reallocation effects: Firms affected by the reforms increased their share of fixed assets and employment in the economy.

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Document Object Identifier (DOI): 10.3386/w21690

Published: Murillo Campello & Mauricio Larrain, 2016. "Enlarging the Contracting Space: Collateral Menus, Access to Credit, and Economic Activity," Review of Financial Studies, vol 29(2), pages 349-383.

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