Quiet Life No More? Corporate Bankruptcy and Bank Competition
Todd A. Gormley
Washington University in St. Louis
Indiana University - Kelley School of Business - Department of Finance
Indiana University - Kelley School of Business - Department of Business Economics & Public Policy
August 12, 2016
Pursuing delinquent borrowers requires considerable effort, and creditors may lack the incentive to exert this costly effort in uncompetitive banking sectors. Using a uniquely large dataset of public and private corporate bankruptcy filings that spans a banking-sector reform that deregulated bank entry across different Indian regions at different times, we find that increased banking competition is associated with more firms seeking a stay on assets, a decline in bankruptcy duration, and a shift towards workouts rather than liquidations. The results are consistent with creditors exerting greater effort to pursue delinquent firms and to resolve bankruptcies more quickly when competition increases.
Number of Pages in PDF File: 61
Keywords: Bankruptcy, creditor rights, bank competition, managerial incentives
JEL Classification: G21, G23, G28, G38
Date posted: March 19, 2010 ; Last revised: August 13, 2016
© 2016 Social Science Electronic Publishing, Inc. All Rights Reserved.
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