Drawing on U.S. Native American reservations, I identify how collateral law and contract enforcement interact to shape credit and real economic activity. I exploit (i) a 2001 Supreme Court ruling that opened a pathway to state-court enforcement of commercial contracts and (ii) the staggered adoption of tribal secured transactions laws (STLs) between 1985 and 2016, which allow movable assets to be pledged as collateral. Using difference-in-differences, I find that reducing enforcement risk via the 2001 ruling increases small-business loan size by 10% where STLs preexisted. STL adoption raises loan size by 11%, with no effect before 2001. STL effects are generally stronger under uniform codes and centralized registries, and gains are disproportionately concentrated in ex ante wealthier reservations. STLs raise wage per worker and income per capita but not total employment. Instead, employment reallocates toward movable-asset-intensive sectors. These results provide micro evidence on the finance–growth link: complementarities between collateral law and enforcement shape how finance affects growth and who benefits across jurisdictions, sectors, and legal designs.

Do creditor rights amplify or mitigate the macroeconomic consequences of credit cycles? Using a panel of 39 countries from 1978 to 2019, we show that credit expansions in economies with strong creditor protection are followed by smaller output losses, fewer non-performing loans, and a greater reallocation of credit away from risky borrowers. Firm-level evidence from the staggered adoption of antirecharacterization laws across U.S. states shows that well-protected creditors cut credit to risky firms with poor growth prospects, while easing credit constraints for productive firms. Our findings suggest that stronger creditor rights can enhance macroeconomic stability by facilitating a more efficient reallocation of capital.

This paper studies the role of collateral using the near-universe of corporate loans from the euro area credit registry. With detailed information on all types of collateral pledged by firms, as well as the values of individual collateral assets, we examine the effect of collateral values on firm borrowing by directly linking credit amounts to their corresponding collateral values. For the first time, we provide evidence of the feedback loop between real estate values and borrowing for real estate investments. We present two main results. First, we estimate that the elasticity of credit amounts with respect to collateral values is 0.18-0.23. Second, we show that increases in collateral values are followed by greater borrowing for real estate investment and construction purposes, and that these effects are even more pronounced for firms operating outside the real estate sector.