Creditors’ Rights and Strategic Default: Evidence from India

Tantri, P L (2020) Creditors’ Rights and Strategic Default: Evidence from India. The Journal of Law and Economics, 63 (3). pp. 411-447. ISSN 1537-5285

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AbstractI examine whether stronger creditors’ rights prevent strategic default. Borrowers who cross either of two thresholds are exempt from a creditor-rights law in India. Using a loan-day-level data set, I find that loan performance is better when the law applies and that outperformance increases after a further rise in creditors’ rights. To discern the strategic motive, I use an unprecedented invalidation of the Indian currency whereby holders of high-value currency were forced to declare their cash holdings to banks. Defaulters exempt from the law showed a greater tendency to repay their loans after invalidation.

Item Type: Article
Subjects: Finance
Date Deposited: 06 Jul 2023 19:31
Last Modified: 06 Jul 2023 19:31

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