{"title":"Bankruptcy reforms and corporate debt structure","authors":"Xiaotian Liu , Yaxuan Qi , Wai Yee Wan","doi":"10.1016/j.intfin.2024.102044","DOIUrl":null,"url":null,"abstract":"<div><p>A growing number of jurisdictions have adopted bankruptcy law reforms to facilitate debt restructuring. Using a difference-in-differences model based on bankruptcy law reforms in six economically advanced jurisdictions, we discover that firms adopt more diversified debt instruments following the reforms. Importantly, firms that are more vulnerable to a tightening of credit supply are more adversely affected by the legal changes, and they also decrease overall debt borrowing and investment. Moreover, firms affected by the reforms use secured debt less frequently, aligning with the idea that these legal changes diminish the protection afforded to secured creditors. In addition, borrowing costs rise after the reforms, implying that creditors may adjust the terms of debt contracts to counterbalance the decreased legal protection.</p></div>","PeriodicalId":48119,"journal":{"name":"Journal of International Financial Markets Institutions & Money","volume":"95 ","pages":"Article 102044"},"PeriodicalIF":5.4000,"publicationDate":"2024-08-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Journal of International Financial Markets Institutions & Money","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S1042443124001100","RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 0
Abstract
A growing number of jurisdictions have adopted bankruptcy law reforms to facilitate debt restructuring. Using a difference-in-differences model based on bankruptcy law reforms in six economically advanced jurisdictions, we discover that firms adopt more diversified debt instruments following the reforms. Importantly, firms that are more vulnerable to a tightening of credit supply are more adversely affected by the legal changes, and they also decrease overall debt borrowing and investment. Moreover, firms affected by the reforms use secured debt less frequently, aligning with the idea that these legal changes diminish the protection afforded to secured creditors. In addition, borrowing costs rise after the reforms, implying that creditors may adjust the terms of debt contracts to counterbalance the decreased legal protection.
期刊介绍：
International trade, financing and investments, and the related cash and credit transactions, have grown at an extremely rapid pace in recent years. The international monetary system has continued to evolve to accommodate the need for foreign-currency denominated transactions and in the process has provided opportunities for its ongoing observation and study. The purpose of the Journal of International Financial Markets, Institutions & Money is to publish rigorous, original articles dealing with the international aspects of financial markets, institutions and money. Theoretical/conceptual and empirical papers providing meaningful insights into the subject areas will be considered. The following topic areas, although not exhaustive, are representative of the coverage in this Journal. • International financial markets • International securities markets • Foreign exchange markets • Eurocurrency markets • International syndications • Term structures of Eurocurrency rates • Determination of exchange rates • Information, speculation and parity • Forward rates and swaps • International payment mechanisms • International commercial banking; • International investment banking • Central bank intervention • International monetary systems • Balance of payments.
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