Collateral damaged? Priority structure, credit supply, and firm performance

Geraldo Cerqueiro*, Steven Ongena, Kasper Roszbach

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

11 Citations (Scopus)


A unique legal reform in 2004 in Sweden redistributed collateral rights from banks holding floating liens to unsecured creditors without changing the value of assets on firms’ balance sheets. Using a country-wide panel of all incorporated firms, we document that a zero-sum redistribution of collateral rights and the resulting reduction in collateral capacity towards banks contracts the amount and maturity of corporate debt and leads firms to slow investment and forego growth. Altering their allocation of assets, firms reduce particularly those assets with a low collateralizable value for banks and also hoard more cash. However, the reform has no impact on corporate capital intensity or efficiency, suggesting that under these newly binding credit constraints firms simply shrink their operations.
Original languageEnglish
Article number100824
Number of pages13
JournalJournal of Financial Intermediation
Publication statusPublished - Oct 2020


  • Collateral
  • Difference-in-differences
  • Financial constraints
  • Floating lien
  • Investment
  • Seniority


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