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Access to Collateral and Corporate Debt Structure: Evidence from a Natural Experiment

Vikrant Vig

London Business School

March 23, 2012

EFA 2008 Athens Meetings Paper

We investigate how firms respond to strengthening of creditor rights by examining their financial decisions following a securitization reform in India. We find that the reform led to a reduction in secured debt, total debt, debt maturity, asset growth and an increase in liquidity hoarding by firms. Moreover, the effects are more pronounced for firms that have a higher proportion of tangible assets, since these firms are more affected by the secured transactions law. These results suggest that strengthening of creditor rights introduces a liquidation bias and documents how firms alter their debt structures to contract around it.

Number of Pages in PDF File: 71

Keywords: Capital Structure, Bankuptcy, Law and Finance, Debt structure, Financial development, Creditor rights

JEL Classification: F34, F37, G21, G28, G33, K39

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Date posted: February 28, 2007 ; Last revised: July 12, 2012

Suggested Citation

Vig, Vikrant, Access to Collateral and Corporate Debt Structure: Evidence from a Natural Experiment (March 23, 2012). EFA 2008 Athens Meetings Paper. Available at SSRN: http://ssrn.com/abstract=965992 or http://dx.doi.org/10.2139/ssrn.965992

Contact Information

Vikrant Vig (Contact Author)
London Business School ( email )
Sussex Place
Regent's Park
London, London NW1 4SA
United Kingdom
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