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The Brazilian Bankruptcy Law Experiment

41 Pages Posted: 30 May 2011  

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)

Multiple version iconThere are 2 versions of this paper

Date Written: 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.

Keywords: Financing Policy, Bankruptcy, Law

JEL Classification: G32, G33, K2

Suggested Citation

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

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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