Does an effective bankruptcy reform increases collateralized borrowing? Evidence from a quasi-natural experiment in India

Ranjeet Singh (), Yogesh Chauhan () and Nemiraja Jadiyappa ()
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Ranjeet Singh: Indian Institute of Management Raipur
Yogesh Chauhan: Indian Institute of Management Raipur
Nemiraja Jadiyappa: Indian Institute of Management Kozhikode

Journal of Regulatory Economics, 2023, vol. 63, issue 1, No 4, 74-86

Abstract: Abstract This article analyses whether a credit ecosystem that enhances the recovery rate of default debt by providing a time-bound method to address insolvency impacts collateralized borrowing. To explore this, we utilize the adoption of the Insolvency and Bankruptcy Act 2016 as a quasi-natural experiment in India. Using a propensity score-matched difference-in-differences approach, our findings demonstrate an increase in secured debt for financially-distressed firms more than non-distressed firms in the post-regulation period. In addition, we show that smaller and less profitable distressed firms experience the most aggressive response to secured debt.

Keywords: Insolvency and Bankruptcy Code 2016; Secured debt; Distressed firms; Quasi-natural experiment (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (3)

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DOI: 10.1007/s11149-023-09458-x

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