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http://ssrn.com/abstract=1853984
 
 

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The Brazilian Bankruptcy Law Experiment


Aloisio Pessoa de Araujo


Getulio Vargas Foundation (FGV) - Escola de Pos-Graduacao (EPGE) and IMPA

Rafael Ferreira


Getulio Vargas Foundation (FGV) - FGV/EPGE Escola Brasileira de Economia e Finanças

Bruno Funchal


FUCAPE Business School; Getulio Vargas Foundation (FGV) - Escola de Pos-Graduacao (EPGE)

May 26, 2011


Abstract:     
In early 2005 a new bankruptcy law was approved by the Brazilian Congress, taking effect a few months later. The new legislation improved creditor protection and the bankruptcy system’s efficiency. This paper tries to shed some light on the empirical consequences of a bankruptcy reform on a poorly developed credit market. Using data from Brazilian and non-Brazilian firms, we estimated, using three alternative models, the effect of the bankruptcy reform on contractual and non-contractual debt variables. In general, all the models yielded similar results. Concerning contractual debt variables, we found a significant increase in the total amount and in long-term debt and a reduction in the cost of debt. For noncontractual debt variables, we found a reduction in the bank debt to public debt ratio, an increase in the number of domestic loan contracts and no impact on the number of foreign loan contracts.

Number of Pages in PDF File: 41

Keywords: Financing Policy, Bankruptcy, Law

JEL Classification: G32, G33, K2

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Date posted: May 30, 2011  

Suggested Citation

Araujo, Aloisio Pessoa de and Ferreira, Rafael and Funchal, Bruno, The Brazilian Bankruptcy Law Experiment (May 26, 2011). Available at SSRN: http://ssrn.com/abstract=1853984 or http://dx.doi.org/10.2139/ssrn.1853984

Contact Information

Aloisio Pessoa de Araujo
Getulio Vargas Foundation (FGV) - Escola de Pos-Graduacao (EPGE) and IMPA ( email )
R. Dr. Neto de Araujo 320 cj 1307
Rio de Janeiro, Rio de Janeiro 22250-900
Brazil
Rafael De Vasconcelos Xavier Ferreira (Contact Author)
Getulio Vargas Foundation (FGV) - FGV/EPGE Escola Brasileira de Economia e Finanças ( email )
Praia de Botafogo 190/1125, CEP
Rio de Janeiro RJ 22253-900
Brazil
Bruno Funchal
FUCAPE Business School ( email )
Fernando Ferrari Avenue 1358
Goiabeiras
Vitória, Espirtio Santo 29075-010
Brazil
Getulio Vargas Foundation (FGV) - Escola de Pos-Graduacao (EPGE) ( email )
R. Dr. Neto de Araujo 320 cj 1307
Rio de Janeiro, Rio de Janeiro 22250-900
Brazil
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