How Do Laws and Institutions Affect Recovery Rates for Collateral?

Hans Degryse, Vasso Ioannidou, José María Liberti, Jason Sturgess*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

11 Scopus citations


Using unique internal bank data on ex ante appraised liquidation and market values of assets pledged as collateral in sixteen countries, we show that laws and institutions that strengthen creditor protection increase expected recovery rates for collateral. Stronger creditor protection increases expected recovery rates for movable collateral relative to immovable collateral and shifts the composition of collateral toward movable assets, thereby increasing debt capacity through both higher loan-to-values and attenuating the creditor's liquidation bias. Our results suggest that the recovery rate for collateral is an important first-stage mechanism through which creditor protection can improve contracting efficiency and enhance access to credit. Received September 17, 2018; editorial decision July 9, 2019 by Editor Andrew Ellul.

Original languageEnglish (US)
Pages (from-to)1-43
Number of pages43
JournalReview of Corporate Finance Studies
Issue number1
StatePublished - Mar 1 2020


  • G2
  • G33
  • G38
  • K1

ASJC Scopus subject areas

  • Economics and Econometrics
  • Finance
  • Business and International Management


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