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Vintage Capital and Creditor Protection

42 Pages Posted: 26 Mar 2008 Last revised: 22 Oct 2008

Efraim Benmelech

Northwestern University - Kellogg School of Management; National Bureau of Economic Research (NBER)

Nittai Bergman

Massachusetts Institute of Technology (MIT) - Sloan School of Management; National Bureau of Economic Research (NBER)

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Abstract

We provide novel evidence linking the level of creditor protection provided by law to the degree of usage of technologically older, vintage capital in the airline industry. Using a panel of aircraft-level data around the world, we find that better creditor rights are associated with both aircraft of a younger vintage and newer technology as well as firms with larger aircraft fleets. Moreover, we find that more profitable airlines, airlines with lower leverage ratios, and airlines with less debt overhang are less sensitive to prevailing creditor rights in their country. We propose that by mitigating financial shortfalls, enhanced legal protection of creditors facilitates the ability of firms to make large capital investments, adapt advanced technologies and foster productivity.

Keywords: Vintage Capital, Creditor Rights, Finance and Growth, Airlines

JEL Classification: G20, G31, G33, L11

Suggested Citation

Benmelech, Efraim and Bergman, Nittai, Vintage Capital and Creditor Protection. Available at SSRN: https://ssrn.com/abstract=1108426 or http://dx.doi.org/10.2139/ssrn.1108426

Efraim Benmelech (Contact Author)

Northwestern University - Kellogg School of Management ( email )

Evanston, IL 60208
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Nittai Bergman

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

50 Memorial Drive
Cambridge, MA 02142
United States
617-253-2933 (Phone)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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