Law and finance: empirical evidence from Germany, Spain, Portugal and Brazil
Tutor / director / evaluatorClosset, Fréderic
Document typeMaster thesis
Rights accessOpen Access
The global financial crisis of 2008 proved that many affected countries did not have effective insolvency laws at that moment. The increase of companies’ insolvencies made it clear that reforms needed to be urgently proposed to amend the inaccurate proceedings. However, not all of the commenced insolvency reforms ended up having the impact upon debtors and creditors that it was intended. The purpose of this paper is thus to prove whether said reforms had a meaningful effect in a group of selected countries upon creditors. I provide a general overview of the insolvency laws for Germany, Spain, Portugal, and Brazil and describe some insolvency reforms that have come into force there recently. The paper then proceeds to the empirical analysis of companies’ data, where descriptive but mostly inferential statistics are implemented, to examine whether investors changed their lending behaviour after the reforms’ commencement. The Chow test and the Difference-in-difference estimation combined with a matching approach are two techniques used to give an answer to this question. The results show that Brazil is the only country where the commencement of the insolvency refom had a true impact upon leverage. Because the Brazilian insolvency law of study is thought to be a creditor-friendly reform, at least in some aspects, we observe that these results support the perspective that stronger creditor rights cause a decrease of financial leverage, also called demand-side view. Stronger creditor rights imply a higher chance that the companies’ management will lose jobs and control in case of bankruptcy and thus the management feels reticent to rely on external financing.
SubjectsGlobal Financial Crisis, 2008-2009 -- Spain, Global Financial Crisis, 2008-2009 -- Germany, Global Financial Crisis, 2008-2009 -- Portugal, Global Financial Crisis, 2008-2009 -- Brazil, Crisi financera global, 2007-2009 -- Espanya, Crisi financera global, 2007-2009 -- Portugal, Crisi financera global, 2007-2009 -- Alemanya, Crisi financera global, 2007-2009 -- Brasil
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