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The Causal Effect of Bankruptcy Law on the Cost of Finance

Serrano-Velarde, Nicolas (2012) The Causal Effect of Bankruptcy Law on the Cost of Finance. In: ZEW Conference: The Green Growth Challenge, 09/03/2012-10/03/2012, Mannheim, Germany.

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We exploit the staggered nature of the Italian bankruptcy law reform of 2005-2006 to disentangle the distinct causal impact of both reorganization and liquidation procedures in bankruptcy on firms' cost of loan financing. Using a unique loan-level dataset covering the universe of firm funding contracts we present two major findings: first, that the introduction of a reorganization procedure increased the interest rates on loan financing; second, that the reform that accelerated the liquidation procedure not only decreased firms' cost of finance but also relaxed credit constraints.

Item Type: Conference or Workshop Item (Paper)
Keywords: Default, Renegotiation, Bankruptcy Code
Subject(s): Taxation
Centre: Oxford University Centre for Business Taxation
Date Deposited: 16 Oct 2012 10:30
Last Modified: 23 Oct 2015 14:07

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