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The Brazilian Bankruptcy Law Experiment

Aloisio Araujo, Bruno Funchal () and Rafael Ferreira

No 23, Fucape Working Papers from Fucape Business School

Abstract: In early 2005 a new bankruptcy law was approved by the Brazilian Congress, taking effect a few months later. The new legislation improved creditor protection and the bankruptcy system's efficiency. This paper tries to shed some light on the empirical consequences of a bankruptcy reform on a poorly developed credit market. Using data from Argentine, Brazilian, Chilean and Mexican firms, we estimated two diff-in-diff models with differential trends: one with a firm-specific trend and the other with a country-specific macro trend. Both models yielded similar results. We found significant impacts on the supply of credit, the cost of debt, and the supply of secured, unsecured and long-term debt. No significant impacts were found for the level of short-term debt.

Keywords: Financing Policy; Bankruptcy; Law (search for similar items in EconPapers)
Pages: 31
Date: 2010-12
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Published in Fucape Working Papers Dezembro 2010

Downloads: (external link) Primeira Versão, 2010 (application/pdf)
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