The Brazilian bankruptcy law experience |
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| Authors: | Aloisio P Araujo Rafael VX Ferreira Bruno Funchal |
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| Institution: | 1. Stanford Graduate School of Business, 655 Knight Way, Stanford, CA 94305, USA;2. NBER, 1050 Massachusetts Ave, Cambridge, MA 02138, USA;3. University of Chicago Booth School of Business, 5807 S Woodlawn Ave, Chicago, IL 60637, USA;4. Columbia Business School, 3022 Broadway, New York, NY 10027, USA;5. CEPR, 33 Great Sutton St, Clerkenwell, London EC1V 0DX, UK;6. Marriott School of Business, Brigham Young University, 640 TNRB, Provo, UT 84602, USA |
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| Abstract: | In early 2005, the Brazilian Congress approved a new bankruptcy law. The new legislation increased creditor protection and improved the efficiency of the bankruptcy system. This paper evaluates the empirical consequences of a bankruptcy reform on a poorly developed credit market. Using data from Brazilian and non-Brazilian firms, we estimated, using two different models, the effect of the bankruptcy reform on contractual and non-contractual debt variables. In general, both models yielded similar results. Concerning contractual debt variables, we found a significant increase in the total amount and the long-term debt and a reduction in the cost of debt. For the non-contractual debt variable, we found no effect in the loans’ ownership structure. |
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