Creditors’ Rights and Strategic Default: Evidence from India

Prasanna Tantri

Journal of Law and Economics, 2020, vol. 63, issue 3, 411 - 447

Abstract: I examine whether stronger creditors’ rights prevent strategic default. Borrowers who cross either of two thresholds are exempt from a creditor-rights law in India. Using a loan-day-level data set, I find that loan performance is better when the law applies and that outperformance increases after a further rise in creditors’ rights. To discern the strategic motive, I use an unprecedented invalidation of the Indian currency whereby holders of high-value currency were forced to declare their cash holdings to banks. Defaulters exempt from the law showed a greater tendency to repay their loans after invalidation.

Date: 2020
References: Add references at CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://dx.doi.org/10.1086/708161 (application/pdf)
http://dx.doi.org/10.1086/708161 (text/html)
Access to the online full text or PDF requires a subscription.

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:ucp:jlawec:doi:10.1086/708161

Access Statistics for this article

More articles in Journal of Law and Economics from University of Chicago Press
Bibliographic data for series maintained by Journals Division ().