Browsing by Subject "collateral"

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  • Xu, Bing; Wang, Honglin; Rixtel, Adrian van (2016)
    BOFIT Discussion Papers 5/2016
    ​This paper investigates if relationship lending and bank market concentration permit informational rent extraction through collateral. We use equity IPOs as informational shocks that erode rent seeking opportunities. Using unique loan data from China, we find collateral incidence increases with relationship intensity and bank market concentration for pre-IPO loans, while these effects are moderated post-IPO. We further discover after an IPO, rent extraction is moderated for safe firms but intensified for risky firms. These results are not driven by differences or changes in financial risks. Ours is the first investigation on collateral determinants for China with loan-level data.
  • Hohti, Marjaana (2020)
    Bank of Finland. Bulletin 4/2020
    In order for banks to obtain credit from the central bank and payments to be transmitted smoothly, adequate collateral is required. Collateral protects the central bank against the credit risk associated with the counterparty. Central bank collateral policy is aimed at supporting the objectives of monetary policy, financial stability and the functioning of markets.
  • Xu, Bing (2018)
    BOFIT Discussion Papers 3/2018
    Published in China Economic Review, 54, 2019, 237-255
    By allowing large classes of movable assets to be used as collateral, the Property Law reform trans-formed the secured transactions in China. Difference-in-differences tests show firms operating with ex-ante more movable assets expand access to bank credit and prolong debt maturity. However, the reform does not seem to improve the efficiency of credit allocation, as debt capacity of ex-ante low quality firms expands the most following the reform. Credit expansion also does not lead to better firm performance. These findings are not driven by confounding factors such as improvements in creditor and property rights protection. Our results also cannot be explained by other important reforms which were introduced around the same time as the introduction of the Property Law. These include anti-tunneling and split-share reforms and amendments to the corporate tax structure in China. We conduct explicit robustness tests for these other reforms and amendments to the corporate tax structure in China. We conduct explicit robustness tests for these other reforms and hence contribute to the empirical literature on the reform process in China with new findings.