 Bankruptcy reforms and corporate debt structureXiaotian Liu, Yaxuan Qi and Wai Yee Wan Journal of International Financial Markets, Institutions and Money, 2024, vol. 95, issue C Abstract: A growing number of jurisdictions have adopted bankruptcy law reforms to facilitate debt restructuring. Using a difference-in-differences model based on bankruptcy law reforms in six economically advanced jurisdictions, we discover that firms adopt more diversified debt instruments following the reforms. Importantly, firms that are more vulnerable to a tightening of credit supply are more adversely affected by the legal changes, and they also decrease overall debt borrowing and investment. Moreover, firms affected by the reforms use secured debt less frequently, aligning with the idea that these legal changes diminish the protection afforded to secured creditors. In addition, borrowing costs rise after the reforms, implying that creditors may adjust the terms of debt contracts to counterbalance the decreased legal protection. Keywords: Bankruptcy law; Debt structure; Borrowing cost; Creditor rights (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:95:y:2024:i:c:s1042443124001100 DOI: 10.1016/j.intfin.2024.102044 Access Statistics for this article Journal of International Financial Markets, Institutions and Money is currently edited by I. Mathur and C. J. Neely More articles in Journal of International Financial Markets, Institutions and Money from Elsevier |
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