October 15 – Cem Demiroğlu
Date: 15 October 2025, Wednesday Time: 10.30 – 11.30 Place: MA-330 "Empty Creditors: How Public Credit Guarantees Impair Loan Restructuring" by Cem Demiroğlu Koç University Abstract Public credit guarantees (PCGs) are increasingly used worldwide to stimulate lending during economic downturns, yet their impact on loan restructuring remains unexplored. This paper shows that PCGs can transform banks into "empty creditors" with reduced loss exposure, leading to inefficient defaults. Using comprehensive loan-level data from Türkiye's 2017 PCG program---the world's largest at the time---we find that, conditional on distress, PCG loans exhibit substantially higher default rates and lower restructuring rates than non-PCG loans, even when comparing loans to the same firm in the same quarter. The effect strengthens with higher guarantee coverage and weakens as banks approach portfolio-level loss caps, demonstrating moral hazard…








