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Bankruptcy law, creditors’ rights and financing choices: Evidence from a quasi-natural experiment in India

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  • Ranjeet Singh
  • Nemiraja Jadiyappa
  • Garima Sisodia

Abstract

In this study, we examined the impact of changes in creditors’ rights on the financial policy of Indian firms in a quasi-natural experimental set up. Using the implementation of Insolvency and Bankruptcy Code (IBC) in 2016 as an exogenous policy shock, we investigated the changes in quantitative (leverage) and qualitative (debt maturity and debt heterogeneity) aspects of the financial policy. Overall, our findings indicated that the strengthening of creditors’ rights had a negative impact on debt ratio and debt heterogeneity and a positive impact on long-term debt maturity structure. These results were observed mainly in those firms that had a high probability of bankruptcy in the pre-implementation period.

Suggested Citation

  • Ranjeet Singh & Nemiraja Jadiyappa & Garima Sisodia, 2021. "Bankruptcy law, creditors’ rights and financing choices: Evidence from a quasi-natural experiment in India," Applied Economics, Taylor & Francis Journals, vol. 53(52), pages 6036-6042, November.
    • Handle: RePEc:taf:applec:v:53:y:2021:i:52:p:6036-6042
    DOI: 10.1080/00036846.2021.1934395
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    Cited by:

    1. Kousik Ganguly & Ajay Kumar Mishra, 2024. "Does Bankruptcy Reforms Enhance Firm Performances for Politically Connected Firms? Evidence from India," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 23(2), pages 170-196, June.
    2. Jadiyappa, Nemiraja & Shrivastav, Santosh, 2022. "Bankruptcy law, creditors’ rights, and cash holdings: Evidence from a quasi-natural experiment in India," Finance Research Letters, Elsevier, vol. 46(PA).
    3. Maren Forier & Nadine Lybaert & Maarten Corten & Niels Appermont & Tensie Steijvers, 2023. "The flip side of the coin: how entrepreneurship-oriented insolvency laws can complicate access to debt financing for growth firms," European Journal of Law and Economics, Springer, vol. 56(3), pages 461-495, December.

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