A recent study finds that collateral risk significantly raises collateral market values, with a one‑unit increase in CR raising market value by 0.33 % in the full sample and up to 0.56 % in low‑CR cases. The impact is similar for defaults (0.42 %) and non‑defaults (0.32 %) and larger for physical collateral (0.53 %) than non‑physical (0.45 %). Maturity consistently lowers market value, while loan amount raises it and protective covariates provide a modest positive boost. Models include firm, bank and collateral fixed effects and achieve R‑squared values of about 0.77–0.78. Placebo tests show credit risk is insignificant for default probability, but maturity is positively linked at the 10 % level, and protective covariates raise default probability at 5 %. Robustness checks and additional regressions confirm the stability of these findings across more than 1.5 million observations.
© European Central Bank, 2025.
Summary derived from the ECB website (https://www.ecb.europa.eu ).
https://www.ecb.europa.eu/pub/pdf/scpwps/ecb.wp3167~272ace64d5.en.pdf
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