Globally Consistent Creditor Protection, Reallocation, and Productivity

102 Pages Posted: 29 Oct 2020 Last revised: 21 Nov 2024

See all articles by Bo Bian

Bo Bian

University of British Columbia

Date Written: October 19, 2020

Abstract

This paper documents across-firm reallocation as an important channel through which creditor rights affect real outcomes. I exploit the staggered adoption of an international convention that provides globally consistent strong creditor protection for aircraft finance. After this reform, country-level productivity increases by 12%, driven mostly by across-firm reallocation. Productive airlines borrow more, expand, and adopt new technology at the expense of unproductive ones. Such reallocation is facilitated by (i) easier and quicker asset redeployment; and (ii) the influx of foreign financiers offering innovative financial products, which improves credit allocative efficiency, allowing productive airlines to borrow and invest more. 

Keywords: Creditor Rights, Allocative Effciency, Reallocation, Productivity and Growth, Law and Finance

JEL Classification: D22, D24, G32, G33, K12, K33, L11

Suggested Citation

Bian, Bo, Globally Consistent Creditor Protection, Reallocation, and Productivity (October 19, 2020). LawFin Working Paper No. 6, Available at SSRN: https://ssrn.com/abstract=3720573 or http://dx.doi.org/10.2139/ssrn.3720573

Bo Bian (Contact Author)

University of British Columbia ( email )

HA 865, UBC Sauder School of Business
2053 Main Mall, Vancouver, BC V6T 1Z2
Vancouver, British Columbia V6T 1Z2
Canada

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