The Effects of Creditor Rights and Bank Information Sharing on Borrower Behavior: Theory and Evidence

50 Pages Posted: 16 Dec 2016

See all articles by John H. Boyd

John H. Boyd

University of Minnesota - Twin Cities - Carlson School of Management

Hendrik Hakenes

Finance Group; Centre for Economic Policy Research (CEPR)

Amanda Heitz

A.B. Freeman School of Business Tulane University

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Date Written: December 2016

Abstract

This paper provides a comprehensive theoretical and empirical analysis of "creditor rights" and "information sharing" throughout over 1.8 million public and private firms in Europe. We show that many of the outcomes associated with greater levels of creditor rights can be obtained with higher information sharing between banks. Both theory and empirics show that creditor rights and information sharing are associated with greater firm leverage, lower profitability, as well as greater distance to default. Moreover, both theory and empirics find that creditor rights and information sharing are robust substitutes. Our analysis suggests that poor creditor rights, which tend to be sticky over time, can be substituted by improved information sharing.

Keywords: Creditor rights, information sharing.

JEL Classification: G21, G28, L15

Suggested Citation

Boyd, John H. and Hakenes, Hendrik and Heitz, Amanda, The Effects of Creditor Rights and Bank Information Sharing on Borrower Behavior: Theory and Evidence (December 2016). Available at SSRN: https://ssrn.com/abstract=2886511

John H. Boyd (Contact Author)

University of Minnesota - Twin Cities - Carlson School of Management ( email )

19th Avenue South
Minneapolis, MN 55455
United States
612-624-1834 (Phone)

Hendrik Hakenes

Finance Group ( email )

Adenauerallee 24-42
D-53113 Bonn
Germany
+49-228-73-9225 (Phone)

HOME PAGE: http://www.finance.uni-bonn.de/hakenes

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Amanda Heitz

A.B. Freeman School of Business Tulane University ( email )

6823 Saint Charles Avenue
New Orleans, LA
United States

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