Debt enforcement, investment, and risk taking across countries

• 成果类型: Article
• 署名作者: Favara, Giovanni; Morellec, Erwan; Schroth, Enrique; Valta, Philip
• 署名单位: Federal Reserve System - USA; Federal Reserve System Board of Governors; Swiss Federal Institutes of Technology Domain; Ecole Polytechnique Federale de Lausanne; City St Georges, University of London; University of Bern; University of Geneva; University of Geneva; Centre for Economic Policy Research - UK
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2016.09.002
• 发表日期: 2017
• 页码: 22-41
• 关键词: Debt enforcement; default; INVESTMENT; ASSET SALES; risk-taking

摘要

We argue that the prospect of an imperfect enforcement of debt contracts in default reduces shareholder-debtholder conflicts and induces leveraged firms to invest more and take on less risk as they approach financial distress. To test these predictions, we use a large panel of firms in 41 countries with heterogeneous debt enforcement characteristics. Consistent with our model, we find that the relation between debt enforcement and firms' investment and risk depends on the firm-specific probability of default. A differences-indifferences analysis of firms' investment and risk taking in response to bankruptcy reforms that make debt more renegotiable confirms the cross-country evidence. (C) 2016 Elsevier B.V. All rights reserved.