Bankruptcy Law And Equity Capital: Evidence From India

Chakraborty, B and Kallapur, S and Mahapatro, S and Tantri, P L (2020) Bankruptcy Law And Equity Capital: Evidence From India. Working Paper. University of Technology Sydney.

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We study the impact of a creditor-in-control bankruptcy regime in India on equity capital particularly on outside equity, which refers to investment by noncontrolling shareholders. We exploit the distance of lenders from the bankruptcy courts for identification. The inflow of both inside and outside equity capital increases significantly and cost reduces as a result of the bankruptcy law. A significant reduction in tunneling of resources by the insiders seems to be the channel at work. An increase in equity is also accompanied by an increase in debt at a lower cost. Firms use the additional capital to increase investment.

Item Type: Monograph (Working Paper)
Subjects: Finance
Date Deposited: 08 Aug 2023 16:08
Last Modified: 08 Aug 2023 16:08

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