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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

Abstract:     
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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