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Creditor Rights, Technology Adoption, and Productivity: Plant-Level Evidence

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  • Nuri Ersahin
  • Philip Strahan

Abstract

I use U.S. Census microdata to analyze the effect of stronger creditor rights on productivity. Following the adoption of antirecharacterization laws that give lenders greater access to the collateral of firms in financial distress, treated plants’ total factor productivity increases by 2.6%. This effect is concentrated among plants belonging to financially constrained firms. I explore the underlying mechanism and find that treated plants change the composition of their investments and their workforce toward newer capital and skilled labor. My results suggest that stronger creditor rights relax borrowing constraints and help firms adopt more efficient production technologies.

Suggested Citation

  • Nuri Ersahin & Philip Strahan, 2020. "Creditor Rights, Technology Adoption, and Productivity: Plant-Level Evidence," The Review of Financial Studies, Society for Financial Studies, vol. 33(12), pages 5784-5820.
    • Handle: RePEc:oup:rfinst:v:33:y:2020:i:12:p:5784-5820.
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    File URL: http://hdl.handle.net/10.1093/rfs/hhaa038
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    Citations

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    Cited by:

    1. Mo, Jianlei & Tu, Qiang & Wang, Jianing, 2023. "Carbon pricing and enterprise productivity-The role of price stabilization mechanism," Energy Economics, Elsevier, vol. 120(C).
    2. (Jianqiu) Bai, John & Mkrtchyan, Anahit, 2023. "What do outside CEOs really do? Evidence from plant-level data," Journal of Financial Economics, Elsevier, vol. 147(1), pages 27-48.
    3. Favara, Giovanni & Gao, Janet & Giannetti, Mariassunta, 2021. "Uncertainty, access to debt, and firm precautionary behavior," Journal of Financial Economics, Elsevier, vol. 141(2), pages 436-453.
    4. Janet Gao & Wenting Ma & Qiping Xu, 2023. "Access to Financing and Racial Pay Gap Inside Firms," Working Papers 23-36, Center for Economic Studies, U.S. Census Bureau.
    5. Zhang, Huilin & Boubaker, Sabri & Ni, Xiaoran, 2023. "Creditor rights and real earnings management: Evidence from quasi-natural experiments," Finance Research Letters, Elsevier, vol. 53(C).
    6. Najah Attig, 2024. "Relaxed Financial Constraints and Corporate Social Responsibility," Journal of Business Ethics, Springer, vol. 189(1), pages 111-131, January.

    More about this item

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law

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