49 Pages Posted: 19 Mar 2010 Last revised: 20 Nov 2016
Date Written: October 9, 2016
Pursuing delinquent borrowers requires considerable effort, and creditors may lack the incentive to exert this costly effort in uncompetitive banking sectors. To examine this, we use a uniquely large dataset of public and private corporate bankruptcy filings spanning a banking-sector reform that deregulated bank entry across different regions of India. 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 resolve bankruptcies more quickly when competition increases.
Keywords: Bankruptcy, creditor rights, bank competition, managerial incentives
JEL Classification: G21, G23, G28, G38
Suggested Citation: Suggested Citation
Gormley, Todd A. and Gupta, Nandini and Jha, Anand, Quiet Life No More? Corporate Bankruptcy and Bank Competition (October 9, 2016). Journal of Financial and Quantitative Analysis (JFQA), Forthcoming. Available at SSRN: https://ssrn.com/abstract=1572797 or http://dx.doi.org/10.2139/ssrn.1572797
By Andras Danis