Maria Loumioti,
Accounting and Management DBA
Thesis Chairs: Krishna Palepu and Paul Healy
The Use of Intangible Assets as Loan Collateral
Using a sample of secured syndicated loans and data from two field studies, I explore the role of intangible assets in reducing financing frictions in credit markets. While the predominant managerial and scholarly perspective suggests that intangible assets are not sufficient collateral (Holthausen and Watts, 2001), I find that eleven percent of U.S.-originated secured loans include intangible assets as loan collateral, and the collateralization of intangibles has significantly increased in recent years. I hypothesize and find that the redeployability of intangibles and borrower reputation are positively related to the probability of using intangibles as loan collateral. I further hypothesize and find that collateralizing intangibles has significantly increased the supply of credit to firms. Moreover, loans secured by intangibles are of similar quality to loans secured by tangibles. Overall, the results suggest that intangible assets increase firm value in credit markets by alleviating financing frictions.
