Abstract
To examine how legal protection of brand names influences firms’ creditworthiness, we construct a comprehensive database of public firms’ bank loans as well as their trademark collateral. We explore the 1996 Federal Trademark Dilution Act (FTDA) that enhanced trademark protection to perform difference-in-differences analysis, and find that firms with better protected trademarks not only pay significantly lower interest rates, but also use more trademark collateral after the FTDA. Moreover, firms with better trademark protection reveal lower cash flow volatility and higher profitability after the FTDA. Our evidence indicates that enhanced legal protection of brand names reduces firms’ costs of borrowing.