Bankruptcy Codes and Innovation

Acharya, V V and Subramanian, K (2009) Bankruptcy Codes and Innovation. The Review of Financial Studies, 22 (12). pp. 4949-4988.

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Abstract

We argue that when bankruptcy code is creditor friendly, excessive liquidations cause levered firms to shun innovation, whereas by promoting continuation upon failure, a debtor-friendly code induces greater innovation. We provide empirical support for this claim by employing patents as a proxy for innovation. Using time-series changes within a country and cross-country variation in creditor rights, we confirm that a creditor-friendly code leads to a lower absolute level of innovation by firms, as well as relatively lower innovation by firms in technologically innovative industries. When creditor rights are stronger, technologically innovative industries employ relatively less leverage and grow disproportionately slower.

Affiliation: Indian School of Business
ISB Creators:
ISB CreatorsORCiD
Subramanian, KUNSPECIFIED
Item Type: Article
Additional Information: The research paper was published by the author with the affiliation of Emory University.
Uncontrolled Keywords: Innovation, Research and Development, Technological Change, Intellectual Property Rights, Economic Growth and Aggregate Productivity, Economy wide Country Studies, Corporate Finance and Governance, Regulation and Business Law
Subjects: Finance
Policy
Depositing User: Ilayaraja M
Date Deposited: 08 Jun 2019 13:22
Last Modified: 09 Jun 2019 19:10
URI: http://eprints.exchange.isb.edu/id/eprint/1032
Publisher URL: https://doi.org/10.1093/rfs/hhp019
Publisher OA policy: http://sherpa.ac.uk/romeo/issn/0893-9454/
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