Real Assets, Collateral and the Limits of Debt Capacity

Erasmo Giambona, Antonio S. Mello, Timothy J. Riddiough

Research output: Contribution to journalArticlepeer-review

5 Scopus citations


We develop a model in which better quality firms separate themselves by issuing unsecured debt and committing to maintain a strong balance sheet, something lower-quality firms find too costly to do. Lower-quality firms, in contrast, pledge real assets in secured debt transactions. However, during turbulent financial periods, pooling occurs in the secured debt market, which raises the average quality of firms in that market. We use the 1998 Russian crisis together with the role played by Fannie Mae and Freddie Mac for apartment REITs to highlight the relation between financing outcomes and firm type.

Original languageEnglish (US)
Pages (from-to)836-886
Number of pages51
JournalReal Estate Economics
Issue number4
StatePublished - Dec 1 2018

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics


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