The Ex Ante Effect of Creditor Rights on Corporate Financial and Investment Policy

Canipek, Aras; Kind, Axel; Wende, Sabine

The Ex Ante Effect of Creditor Rights on Corporate Financial and Investment Policy

Dateien

Zu diesem Dokument gibt es keine Dateien.

Datum

2018

Autor:innen

Canipek, Aras

Kind, Axel

Wende, Sabine

DOI (zitierfähiger Link)

https://doi.org/10.2139/ssrn.3121980

Sammlungen

Wirtschaftswissenschaften

Publikationstyp

Working Paper/Technical Report

Publikationsstatus

Published

Zusammenfassung

We examine the ex ante effect of an exogenous reduction in secured creditor rights on corporate financial and investment policy. We find that firms increase corporate leverage using both the reduced distress costs of secured debt and the positive externalities the lower secured creditor rights transfer to the borrowing costs of unsecured credit. Further, firms discard investments that reduce the risk of uncovering distress costs but are, however, less profitable. Our results suggest that firms eliminate unproductive protection mechanisms previously set in place to contract around costly bankruptcy legislations. This interpretation is confirmed by higher levels of risk and profitability. After establishing the average effect, we also show that the financing and investment response is highly dependent on the firm types which attract heterogeneous intensities in the positive (reduced distress costs) and negative (increased secured borrowing costs) effects of the weakened secured creditor rights. This result suggests that a uniform bankruptcy infrastructure that balances positive and negative effects of secured creditor rights is unsuited to be the optimal solution. Our finding rather points to a menu of bankruptcy procedures in which a debtor- and creditor-friendly code co-exist and thus allows different types of firms to contract for preferred procedures.

Fachgebiet (DDC)

330 Wirtschaft

Schlagwörter

Creditor Rights, Bankruptcy Codes, Capital Structure, Investment, Profitability, Risk, ESUG

Zitieren

ISO 690

CANIPEK, Aras, Axel KIND, Sabine WENDE, 2018. The Ex Ante Effect of Creditor Rights on Corporate Financial and Investment Policy

BibTex

@techreport{Canipek2018Effec-47974,
  year={2018},
  doi={10.2139/ssrn.3121980},
  title={The Ex Ante Effect of Creditor Rights on Corporate Financial and Investment Policy},
  author={Canipek, Aras and Kind, Axel and Wende, Sabine}
}

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Universitätsbibliographie

Ja