Insolvency Regimes and Cross-Border Investment Decisions

43 Pages Posted: 15 Apr 2020

See all articles by Tatsiana Kliatskova

Tatsiana Kliatskova

German Institute for Economic Research (DIW Berlin)

Loïc Baptiste Savatier

affiliation not provided to SSRN

Date Written: April 2020

Abstract

This paper investigates the effect of reforms of insolvency regulations on cross-border debt and equity investments at a sectoral level. Using disaggregated data from the Securities Holdings Statistics by Sector (SHSS) and OECD-indicators on the efficiency of insolvency regulations, we find that investors prefer to invest more in countries with more efficient insolvency frameworks. The effect, however, differs across sectors, with households and institutional investors being particularly sensitive. In addition, share-holders are mostly responsive to prevention and streamlining tools, while debt-holders respond more to availability of restructuring tools. Finally, we show that countries with developed financial markets and effective government are the ones that see the largest debt and equity inflows after reforms of insolvency regulations.

Keywords: Capital market integration, insolvency law, sectoral effects

JEL Classification: F21,G15,G33

Suggested Citation

Kliatskova, Tatsiana and Savatier, Loïc Baptiste, Insolvency Regimes and Cross-Border Investment Decisions (April 2020). DIW Berlin Discussion Paper No. 1862, Available at SSRN: https://ssrn.com/abstract=3576433 or http://dx.doi.org/10.2139/ssrn.3576433

Tatsiana Kliatskova (Contact Author)

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstraße 58
Berlin, 10117
Germany

Loïc Baptiste Savatier

affiliation not provided to SSRN

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