Collateral Shock and Access to Credit : Evidence from Loan Application Data

Exploiting a policy-induced variation in asset liquidation value, we evaluate how changes in lenders’ ability to liquidate collateral affect non-mortgage credit provision in the context of personal loan application. The housing policy increases the probability of loans being granted by 6.5%. The effect is robust to correcting for bias of staggered difference-in-differences estimation and is not driven by changes in local credit demand. Improved collateral liquidity is the key channel driving the results. Furthermore, the credit expansion does not lead to increased delinquency. Analysing credit statistics data verify external validity of our findings