The Harvard Law School Forum on Corporate Governance https://corpgov.law.harvard.edu The leading online blog in the fields of corporate governance and financial regulation. Fri, 06 Aug 2021 13:01:45 +0000 en-US hourly 1 https://wordpress.org/?v=5.7.2 Tests of Ex Ante versus Ex Post Theories of Collateral https://corpgov.law.harvard.edu/2010/11/19/tests-of-ex-ante-versus-ex-post-theories-of-collateral/ https://corpgov.law.harvard.edu/2010/11/19/tests-of-ex-ante-versus-ex-post-theories-of-collateral/#respond Fri, 19 Nov 2010 14:20:17 +0000 http://blogs.law.harvard.edu/corpgov/?p=14029?d=20150106101754EST Posted by R. Christopher Small, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Friday, November 19, 2010
Editor's Note: The following post comes to us from Allen Berger, Professor of Finance at the University of South Carolina; W. Scott Frame of the Federal Reserve Bank of Atlanta; and Vasso Ioannidou, Professor of Financial Intermediation at Tilburg University.

In our paper, Tests of Ex Ante versus Ex Post Theories of Collateral Using Private and Public Information, forthcoming in the Journal of Financial Economics, we test the empirical predictions generated by two broad classes of theories about why borrowers pledge collateral. The first set of theories motivates collateral as a way for good borrowers to signal their quality under conditions of ex ante private information. The second set of theories explains collateral as an optimal response to ex post contract frictions like moral hazard. A growing body of literature that empirically tests these models and the on-going financial crisis have raised significant academic and policy interest in understanding the role of collateral in debt contracts.

(more…)

]]> https://corpgov.law.harvard.edu/2010/11/19/tests-of-ex-ante-versus-ex-post-theories-of-collateral/feed/ 0