Creditors’ Rights and Strategic Default: Evidence from India
I 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...
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| Veröffentlicht in: | The Journal of law & economics 2020-08, Vol.63 (3), p.411-447 |
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| container_title | The Journal of law & economics |
| container_volume | 63 |
| creator | Tantri, Prasanna |
| description | I 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. |
| doi_str_mv | 10.1086/708161 |
| format | Article |
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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. 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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. 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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.</abstract><cop>Chicago</cop><pub>The University of Chicago Press</pub><doi>10.1086/708161</doi><tpages>37</tpages></addata></record> |
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| ispartof | The Journal of law & economics, 2020-08, Vol.63 (3), p.411-447 |
| issn | 0022-2186 1537-5285 |
| language | eng |
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| source | University of Chicago Press Journals; HeinOnline Law Journal Library |
| subjects | Bankruptcy reorganizations Creditors Default Loans Methods Money Priorities of claims and liens Thresholds |
| title | Creditors’ Rights and Strategic Default: Evidence from India |
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