The Benefits and Costs of Secured Debt / Efraim Benmelech.

Format:

Book

Author/Creator:

Benmelech, Efraim.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w32353.

NBER working paper series no. w32353

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2024.

Summary:

Secured debt--a debt contract that offers security to creditors in the form of collateralized assets--has been a cornerstone of credit markets in most societies since antiquity. The ability to seize and sell collateral reduces the creditor's expected losses when the debtor defaults on a promised payment. Moreover, when a firm borrows from multiple creditors with different seniorities, debt secured by assets has higher priority relative to other creditors and is first in line for payment if the firm is bankrupt. While the benefits of secured debt have been shown in both the theoretical and empirical literature, less is known about the costs associated with secured borrowing. This paper surveys the burgeoning empirical literature on secured debt and provides an assessment of the costs and benefits of secured debt.

Notes:

Print version record

April 2024.