Creditor Rights And Allocative Distortions: Evidence From India

Nirupama Kulkarni

Working Papers from Centre for Advanced Financial Research and Learning (CAFRAL)

Abstract: This paper highlights how stronger creditor rights improve allocative efficiency of credit and capital in the economy. Exploiting a collateral reform in India that strengthened creditor rights, I show that lenders cut credit to riskier borrowers. This is partly driven by a reduction in credit to otherwise insolvent borrowers (zombies). Importantly, credit access improved for non-zombie firms in industries that became decongested due to reductions in credit to zombie firms. As a result, non-zombie firms increased investment. Aggregate productivity of capital improved due to within-firm improvements and reallocation of capital to more productive firms, as well as due to their positive spillovers through the input-output linkages of the decongested industries.

Keywords: Misallocation; credit access; zombies; distortions (search for similar items in EconPapers)
JEL-codes: G20 G33 O16 O47 (search for similar items in EconPapers)
Pages: 66
Date: 2019-03
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.cafral.org.in/sfControl/content/Speech ... ocationNKulkarni.pdf
Our link check indicates that this URL is bad, the error code is: 500 Can't connect to www.cafral.org.in:443 (A connection attempt failed because the connected party did not properly respond after a period of time, or established connection failed because connected host has failed to respond.)

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:ris:cafral:022305

Access Statistics for this paper

More papers in Working Papers from Centre for Advanced Financial Research and Learning (CAFRAL) Contact information at EDIRC.
Bibliographic data for series maintained by Vijayshree ().