Busy bankruptcy courts and the cost of credit

• 成果类型: Article
• 署名作者: Muller, Karsten
• 署名单位: National University of Singapore
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2021.08.010
• 发表日期: 2022
• 页码: 824-845
• 关键词: bankruptcy; COURTS; Debt enforcement; law and finance

摘要

This paper estimates the effect of bankruptcy court caseload on access to credit by ex-ploiting firms' plausibly exogenous exposure to the largest recorded drop in court back-log in the United States following the 2005 consumer bankruptcy reform. I show that a drop in court congestion reduces the time firms spend in bankruptcy and increases re-covery values, which is priced into credit spreads and loan maturities. Consistent with a shock to credit supply, less congested courts increase firm leverage but leave default risk unchanged. A back-of-the-envelope calculation suggests that backlog in bankruptcy courts costs corporate borrowers at least $740 million per year in interest payments. (c) 2021 Elsevier B.V. All rights reserved.