https://scholars.lib.ntu.edu.tw/handle/123456789/414937
Title: | Collateral, loan guarantees, and the lenders' incentives to resolve financial distress | Authors: | YEH-NING CHEN | Keywords: | Collateral | Financial distress | Loan guarantee | Renegotiation | Issue Date: | 1-Feb-2006 | Journal Volume: | 46 | Journal Issue: | 1 | Start page/Pages: | 1 | Source: | Quarterly Review of Economics and Finance | Abstract: | This paper proposes that the timing for when collateral is pledged will affect the lenders' incentives to resolve financial distress. It demonstrates that, if the amount of collateral pledged in a loan contract exceeds a critical value, the borrower's project may be inefficiently liquidated once he becomes financially distressed. It also shows that a fairly priced loan guarantee provided by a third party can partially alleviate this inefficient liquidation problem. This paper predicts that riskier borrowers will pledge more collateral, which is consistent with the empirical findings of Berger and Udell [Berger, A. N., & Udell, G. F. (1990). Collateral, loan quality, and bank risk. Journal of Monetary Economics, 25, 21-42] and Leeth and Scott [Leeth, J. D., & Scott, J. A. (1989). The incidence of secured debt: evidence from the small business community. Journal of Financial and Quantitative Analysis, 24, 379-394]. © 2005 Board of Trustees of the University of Illinois. All rights reserved. |
URI: | https://scholars.lib.ntu.edu.tw/handle/123456789/414937 | ISSN: | 10629769 | DOI: | https://api.elsevier.com/content/abstract/scopus_id/33644621686 10.1016/j.qref.2004.10.001 |
Appears in Collections: | 財務金融學系 |
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