The causal effect of bankruptcy law on the cost of finance

Serrano-Velarde, Nicolas, Rodano, Giacomo and Tarantino, Emanuele (2012) The causal effect of bankruptcy law on the cost of finance. In: 39th Annual Meeting of the European Finance Association 2012, 15/08/2012-18/08/2012, Copenhagen.

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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 data-set 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: 09 Nov 2012 16:07
Last Modified: 23 Oct 2015 14:07

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