The Brazilian Bankruptcy Law Experience

11 Pages Posted: 26 Sep 2013

See all articles by Aloisio Araujo

Aloisio Araujo

Getulio Vargas Foundation (FGV) - FGV/EPGE Escola Brasileira de Economia e Finanças

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)

Date Written: September 24, 2013

Abstract

In early 2005, the Brazilian Congress approved a new bankruptcy law. The new legislation increased creditor protection and improved the efficiency of the bankruptcy system. This paper evaluates the empirical consequences of a bankruptcy reform on a poorly developed credit market. Using data from Brazilian and non-Brazilian firms, we estimated, using two different models, the effect of the bankruptcy reform on contractual and non-contractual debt variables. In general, both models yielded similar results. Concerning contractual debt variables, we found a significant increase in the total amount and the long-term debt and a reduction in the cost of debt. For the non-contractual debt variable, we found no effect in the loans ownership structure.

Keywords: Financing policy, Bankruptcy, Law

JEL Classification: G32, G33, K2

Suggested Citation

Araujo, Aloisio and Ferreira, Rafael de Vasconcelos Xavier and Funchal, Bruno, The Brazilian Bankruptcy Law Experience (September 24, 2013). Journal of Corporate Finance, Vol. 18, No. 4, 2012. Available at SSRN: https://ssrn.com/abstract=2330355

Aloisio Araujo (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

Rafael de Vasconcelos Xavier Ferreira

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

Register to save articles to
your library

Register

Paper statistics

Downloads
110
Abstract Views
1,508
rank
248,059
PlumX Metrics