Access to Collateral and Corporate Debt Structure: Evidence from a Natural Experiment

Vikrant Vig*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

117 Scopus citations

Abstract

We investigate how firms respond to strengthening of creditor rights by examining their financial decisions following a securitization reform in India. We find that the reform led to a reduction in secured debt, total debt, debt maturity, and asset growth, and an increase in liquidity hoarding by firms. Moreover, the effects are more pronounced for firms that have a higher proportion of tangible assets because these firms are more affected by the secured transactions law. These results suggest that strengthening of creditor rights introduces a liquidation bias and documents how firms alter their debt structures to contract around it.

Original languageEnglish (US)
Pages (from-to)881-928
Number of pages48
JournalJournal of Finance
Volume68
Issue number3
DOIs
StatePublished - Jun 2013
Externally publishedYes

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

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