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Access to Collateral and the Democratization of Credit: France's Reform of the Napoleonic Security Code

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  • KEVIN ARETZ
  • MURILLO CAMPELLO
  • MARIA‐TERESA MARCHICA

Abstract

France's Ordonnance 2006‐346 repudiated the notion of possessory ownership in the Napoleonic Code, easing the pledge of physical assets in a country where credit was highly concentrated. A differences‐test strategy shows that firms operating newly pledgeable assets significantly increased their borrowing following the reform. Small, young, and financially constrained businesses benefitted the most, observing improved credit access and real‐side outcomes. Start‐ups emerged with higher “at‐inception” leverage, located farther from large cities, with more assets‐in‐place than before. Their exit and bankruptcy rates declined. Spatial analyses show that the reform reached firms in rural areas, reducing credit access inequality across France's countryside.

Suggested Citation

  • Kevin Aretz & Murillo Campello & Maria‐Teresa Marchica, 2020. "Access to Collateral and the Democratization of Credit: France's Reform of the Napoleonic Security Code," Journal of Finance, American Finance Association, vol. 75(1), pages 45-90, February.
    • Handle: RePEc:bla:jfinan:v:75:y:2020:i:1:p:45-90
    DOI: 10.1111/jofi.12846
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    Cited by:

    1. Bernhardt, Dan & Koufopoulos, Kostas & Trigilia, Giulio, 2021. "The pitfalls of pledgeable cash flows : soft budget constraints, zombie lending and under-investment," The Warwick Economics Research Paper Series (TWERPS) 1327, University of Warwick, Department of Economics.
    2. Bernhardt, Dan & Koufopoulos, Kostas & Trigilia, Giulio, 2020. "Is there a paradox of pledgeability?," Journal of Financial Economics, Elsevier, vol. 137(3), pages 606-611.
    3. Mathias Lé & Frédéric Vinas, 2020. "The Financing of Investment: Firm Size, Asset Tangibility and the Size of Investment," Working papers 777, Banque de France.
    4. Bu, Di & Liao, Yin, 2022. "Land property rights and rural enterprise growth: Evidence from land titling reform in China," Journal of Development Economics, Elsevier, vol. 157(C).
    5. Shiyi Chen & Wanlin Liu & Hong Song & Qing Zhang, 2024. "Government‐led e‐commerce expansion project and rural household income: Evidence and mechanisms," Economic Inquiry, Western Economic Association International, vol. 62(1), pages 150-174, January.
    6. Campello, Murillo & Connolly, Robert A. & Kankanhalli, Gaurav & Steiner, Eva, 2022. "Do real estate values boost corporate borrowing? Evidence from contract-level data," Journal of Financial Economics, Elsevier, vol. 144(2), pages 611-644.
    7. Abderrahim Assab, 2023. "Flood Insurance, Building Codes, and Public Adaptation: Implications for Airport Investment and Financial Constraints," JRFM, MDPI, vol. 16(8), pages 1-29, August.
    8. Yuqiang Cao & Weiming Liang & Guocheng Yang & Jun Yin, 2022. "Judicial Independence and Domestic Supply Chain: Evidence from a Quasi-Natural Experiment," Sustainability, MDPI, vol. 14(24), pages 1-17, December.
    9. Liu, Guanchun & Liu, Yuanyuan & Ye, Yongwei & Zhang, Chengsi, 2021. "Collateral menus and corporate employment: Evidence from China's Property Law," Journal of Economic Behavior & Organization, Elsevier, vol. 189(C), pages 686-709.

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