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Does an effective bankruptcy reform increases collateralized borrowing? Evidence from a quasi-natural experiment in India

Author

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  • Ranjeet Singh

    (Indian Institute of Management Raipur)

  • Yogesh Chauhan

    (Indian Institute of Management Raipur)

  • Nemiraja Jadiyappa

    (Indian Institute of Management Kozhikode)

Abstract

This article analyses whether a credit ecosystem that enhances the recovery rate of default debt by providing a time-bound method to address insolvency impacts collateralized borrowing. To explore this, we utilize the adoption of the Insolvency and Bankruptcy Act 2016 as a quasi-natural experiment in India. Using a propensity score-matched difference-in-differences approach, our findings demonstrate an increase in secured debt for financially-distressed firms more than non-distressed firms in the post-regulation period. In addition, we show that smaller and less profitable distressed firms experience the most aggressive response to secured debt.

Suggested Citation

  • Ranjeet Singh & Yogesh Chauhan & Nemiraja Jadiyappa, 2023. "Does an effective bankruptcy reform increases collateralized borrowing? Evidence from a quasi-natural experiment in India," Journal of Regulatory Economics, Springer, vol. 63(1), pages 74-86, April.
    • Handle: RePEc:kap:regeco:v:63:y:2023:i:1:d:10.1007_s11149-023-09458-x
    DOI: 10.1007/s11149-023-09458-x
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    References listed on IDEAS

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    Cited by:

    1. Zhang, Yue & Wu, Kai, 2023. "Bankruptcy court establishment and corporate risk-taking," Finance Research Letters, Elsevier, vol. 58(PC).

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