Gender Bias in Debt Renegotiation

Abstract

We study the role of gender in corporate debt renegotiation. Using in-court reorganizations from Brazil, we identify our results by comparing the votes of male- and female-led creditor companies within the same filing. We find that gender bias originates from the male managers of creditor companies, as they are more likely to reject reorganization plans involving female-led debtors. This results in deadweight loss, as female-led debtors are more likely to generate greater levels of recovery for creditors in reorganization than in liquidation. Our evidence is consistent with miscalibrated beliefs: bias held by male creditors against female entrepreneurs can be mitigated by showcasing successful examples of female-led businesses.

Keywords: distressed debt, Chapter 11, Corporate bankruptcy, corporate reorganization, gender discrimination

JEL Classification: G32, G33, G38, J16, K22