Bankruptcy Law and the Cost of Banking Finance
Emanuele Tarantino and
Nicolas Serrano-Velarde ()
No 1218, Working Papers from Oxford University Centre for Business Taxation
Many theories study how firms'cost of funding depends on reorganization and liquidation in bankruptcy. However empirical evidence on this subject is scarce due to the difficulty in interpreting reforms that change different legal instruments at the same time. We take advantage of the timing of the 2005-2006 Italian bankruptcy law and combine it with a unique loan-level dataset. We find that the introduction of a reorganization procedure increased the interest rates on bank loans; the reform that made the liquidation procedure faster reduced firms' loan costs; and the presence of gains from creditor coordination reduced the cost of funding.
Keywords: Default; Renegotiation; Bankruptcy Code. (search for similar items in EconPapers)
JEL-codes: G21 G30 G33 (search for similar items in EconPapers)
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