Speaker: Fabiana Sabatini, LUISS
Title: Determinants of collateral in bank lending in crisis times: a borrower or a lender story?
Abstract: The sharp increase in the levels of asymmetric information in (wholesale and retail) Italian debt markets following events such as the failure of Lehman Brothers, the double-dip recession and the accumulation of impaired loans in bank balance sheets, calls for an enhanced importance of collateral in loan contracting as for the last decade. We analyze firm and bank determinants of the collateral policies adopted on corporate loans before and during the global financial crisis, a topic largely unexplored. Our results indicate that collateral policies have been tightened in crisis times to prevent (potentially) opportunistic behaviors of existing borrowers. The tightening involved mainly poorly capitalized firms as well as borrowers already delinquent on bank loans.