Bankruptcy reform and corporate risk-taking: Evidence from a quasi-natural experiment

Ranjeet Singh, Yogesh Chauhan and Nemiraja Jadiyappa

Finance Research Letters, 2022, vol. 47, issue PB

Abstract: Using the initiation of bankruptcy reforms in India, we assess the causal effect of the bankruptcy reform on corporate risk-taking. We observe that the reform that balances the rights of creditors and debtors enables distressed firms to increase their corporate risk-taking than non-distressed firms. We next show that an increase in corporate risk-taking increases the operating performance of distressed firms, compared with non-distressed firms. These results indicate that the bankruptcy reform that favors safe viable businesses instead of forcing distressed firms to inefficient liquidation alters firms’ incentives to take the risk.

Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1544612322000083
Full text for ScienceDirect subscribers only

Related works:
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:eee:finlet:v:47:y:2022:i:pb:s1544612322000083

DOI: 10.1016/j.frl.2022.102679

Access Statistics for this article

Finance Research Letters is currently edited by R. Gençay

More articles in Finance Research Letters from Elsevier
Bibliographic data for series maintained by Catherine Liu ().