The Brazilian Bankruptcy Law Experience
11 Pages Posted: 26 Sep 2013
Date Written: September 24, 2013
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.
Keywords: Financing policy, Bankruptcy, Law
JEL Classification: G32, G33, K2
Suggested Citation: Suggested Citation