Intellectual property rights as loan collateral

Title: Intellectual property rights as loan collateral

Abstract: In this study, we are first to investigate the use of different types of intellectual property (IP) as collateral in loan contracts. We exploit a set of previously disclosed information from administrative sources on IP collateralization in France combined with proprietary firm-level financial data to provide novel insights IP-backed lending activities. Our empirical analysis begins with a documentation on firm- and IP-level determinants for the use of IP collateral in France between 2005 and 2018, differentiating and comparing among trademarks, designs, and patents. Using matching techniques allows us to causally show that IP collateral events relax financing constraints of respective firms by enhancing their debt capacity. In a final step, we provide evidence on the real economic implications of such pledges on future IP generation and firm-level growth. Exploring our unique dataset therefore highlights the potential of intellectual property as a strategic device to support external financing activities and growth.