The Brazilian bankruptcy law reform,corporate ownership concentration,and risk-taking

We investigate whether a bankruptcy reform, which increased creditors' protection, affected the risk taking of Brazilian firms. Collecting data from Brazilian (treatment group) and Argentinian, Chilean, Colombian, Mexican, and Peruvian firms (control group) and using a difference-in-difference technique, we show that Brazilian firms with concentrated ownership structure decreased risk taking after the reform. Our results suggest that these firms reduced risk in response to increasing creditors' protection, possibly because controlling shareholder fear losing control. Moreover, our results indicate that the reform probably provoked a wealth transfer from minorities to controlling shareholders.