The paper investigates the relationship between bank interest rate margins and collateral for loans issued to new ventures. The analysis finds a convex U-shaped relationship. The results indicate that while provision of collateral initially reduces bank exposure to risk (through security, more...

It is commonly assumed that binding collateral constraints amplify the impact of aggregate shocks on the economy. However, we show that when firms can hedge against aggregate risk with state-contingent lending contracts, binding collateral constraints no longer amplify shocks relative to the...

We investigate how financial contracting interacts with lending channel effects by tracing the anatomy of a credit supply shock using micro-level data from a multinational bank. Borrowers with stronger lending relationships, higher non-lending revenues, and those that pledge collateral,...

This paper develops a simple model with collateralized borrowing constraints to explore the business cycle implications of financial leverage. The degree of leverage is shown to be an important factor in the amplifying role of collateral constraints, suggesting that the financial vulnerability...

Elizabeth Anderson exalts the transition from the aristocratic to the modern ethic of debt as one of the most significant cultural achievements of capitalism. Whereas the debitor was once forced to compromise his liberty, dignity, and equality, today the rights and freedoms of insolvents are...