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QUEEN’S BUSINESS SCHOOL FINANCE SEMINAR SERIES

Wednesday 18^th March

1pm

“Provisional Title "Does Creditor Protection Matter for Corporate Borrowing? Evidence from the European Insolvency Regulation”

University of Manchester

Abstract

We exploit a natural experiment created by the 2002 European Insolvency Regulation (EIR) to identify the causal effect of creditor rights on corporate borrowing. The EIR unexpectedly reassigned the insolvency

jurisdiction of many foreign subsidiaries within the European Union from their host country to the country where their parent companies are headquartered, exposing otherwise similar firms

operating in the same economic environment to different creditor rights regimes. Using double and triple-difference designs, we show that shifts toward stronger creditor-rights regimes increase firm

debt financing, whereas shifts toward weaker reduce that financing. We also show that while several dimensions of creditor protection significantly affect corporate borrowing, they do so asymmetrically. In

addition, the effects of creditor rights are amplified in stronger legal enforcement environments. We finally find little evidence that broader cultural or political factors explain our results.

QBS Student Hub, Entrepreneurial Hub, 01.028

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Meeting ID: 319 074 674 552 25

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