The Decline of Secured Debt

Efraim Benmelech, Nitish Kumar and Raghuram Rajan

No 26637, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The share of secured debt issued (as a fraction of total corporate debt) declined steadily in the United States over the twentieth century. This stems partly from financial development giving creditors greater confidence that high quality borrowers will respect their claims even if creditors do not obtain security up front. Consequently, such borrowers prefer retaining financial flexibility by not giving security up front. Instead, security is given contingently – when a firm approaches distress. This also explains why superimposed on the secular decline, the share of secured debt issued is countercyclical.

JEL-codes: G32 K22 N12 (search for similar items in EconPapers)
Date: 2020-01
New Economics Papers: this item is included in nep-his
Note: CF DAE EFG LE
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Citations: View citations in EconPapers (21)

Published as EFRAIM BENMELECH & NITISH KUMAR & RAGHURAM RAJAN, 2024. "The Decline of Secured Debt," The Journal of Finance, vol 79(1), pages 35-93.

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