Bankruptcy law and bank financing

Giacomo Rodano, Nicolas Serrano-Velarde and Emanuele Tarantino

No 1013, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: Exploiting the timing of the 2005-06 Italian bankruptcy law reforms, we disentangle the effects of reorganization and liquidation in bankruptcy on bank financing and firms’ investment. A 2005 reform introduces procedures facilitating loan renegotiation. The 2006 reform subsequently strengthens creditor rights in liquidation. The first reform increases interest rates and reduces investment. The second reform reduces interest rates and spurs investment. Our results highlight the importance of identifying the distinct effects of liquidation and reorganization, as these procedures address differently the tension in bankruptcy law between the continuation of viable businesses and the preservation of repayment incentives.

Keywords: financial distress; financial contracting; renegotiation; multi-bank borrowing; bankruptcy courts (search for similar items in EconPapers)
JEL-codes: G33 K22 (search for similar items in EconPapers)
Date: 2015-06
New Economics Papers: this item is included in nep-ban, nep-cfn and nep-law
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.bancaditalia.it/pubblicazioni/temi-disc ... 013/en_tema_1013.pdf (application/pdf)

Related works:
Journal Article: Bankruptcy law and bank financing (2016)
Working Paper: Bankruptcy Law and Bank Financing (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bdi:wptemi:td_1013_15

Access Statistics for this paper

More papers in Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area Contact information at EDIRC.
Bibliographic data for series maintained by ().