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The Brazilian bankruptcy law reform, corporate ownership concentration, and risk‐taking

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  • Henrique Castro Martins

Abstract

We investigate whether a bankruptcy reform, which increased creditors' protection, affected the risk taking of Brazilian firms. Collecting data from Brazilian (treatment group) and Argentinian, Chilean, Colombian, Mexican, and Peruvian firms (control group) and using a difference‐in‐difference technique, we show that Brazilian firms with concentrated ownership structure decreased risk taking after the reform. Our results suggest that these firms reduced risk in response to increasing creditors' protection, possibly because controlling shareholder fear losing control. Moreover, our results indicate that the reform probably provoked a wealth transfer from minorities to controlling shareholders.

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  • Henrique Castro Martins, 2020. "The Brazilian bankruptcy law reform, corporate ownership concentration, and risk‐taking," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 41(4), pages 562-573, June.
    • Handle: RePEc:wly:mgtdec:v:41:y:2020:i:4:p:562-573
    DOI: 10.1002/mde.3120
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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).
    2. Ziwei Wang & Chunfeng Wang & Zhenming Fang, 2023. "Common institutional ownership and corporate misconduct," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(1), pages 102-136, January.

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