Bankruptcy Law and Financial Contracting: The Impact of the Italian 2005/2006 Bankruptcy Law Reform on the Cost of Finance of Firms

Serrano-Velarde, Nicolas (2011) Bankruptcy Law and Financial Contracting: The Impact of the Italian 2005/2006 Bankruptcy Law Reform on the Cost of Finance of Firms. In: EEA‐ESEM Conference (the 26th Annual Congress of the European Economic Association and the 65th European Meeting of the Econometrics Society), 25-29 August 2011, University of Oslo.

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Abstract

We analyze the impact of the 2005 Italian bankruptcy law reform on financial contracts signed between manufacturing firms and banks: do bankruptcy codes impact on contracting terms of loans at origination? This article answers this important question by combining a unique Italian loan level dataset and by exploiting a quasi-natural experiment associated to the reform. We find that the new design of the liquidation procedure reduced significantly the cost of debt financing. Conversely, we find that the stronger power given by law to entrepreneurs to renegotiate the terms of financial contracts increased the the cost of debt financing.

Item Type: Conference or Workshop Item (Paper)
Keywords: Default, Renegotiation, Bankruptcy Code
Subject(s): Taxation
Centre: Oxford University Centre for Business Taxation
Date Deposited: 23 Aug 2012 10:20
Last Modified: 23 Oct 2015 14:07
URI: http://eureka.sbs.ox.ac.uk/id/eprint/4169

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