This paper investigates the effect of real assets as collateral on the economy. I show how credit rationing is mitigated by the exsistence of bad firms whether it is linked to the value of distressed assets. Indeed, when loans are collateralized and firms are credit constrained, the amount...

This paper investigates empirically the role of real assets in credit rationing. The analysis is based on the idea that asset tangibility is inversely related to the probability that a firm will be credit constrained. Indeed, when loans are collateralized, the amount borrowed is determined by...