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How do insolvency codes affect a firm's investment?

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  • Pindado, Julio
  • Rodrigues, Luis
  • de la Torre, Chabela

Abstract

This paper provides an ex ante analysis of the effect of financial insolvency codes on investment by examining the main characteristics embodied in several codes that may cause investment distortions. The results from the estimation of an extended version of the q model of investment show a negative relationship between ex ante insolvency costs and investment. Furthermore, most of the analysed characteristics of insolvency codes negatively impact on investment; however, the magnitude of this effect is greater concerning those of reorganization without creditors' consent and creditors' lack of control, as compared to those of automatic stay and the violation of absolute priority.

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Bibliographic Info

Article provided by Elsevier in its journal International Review of Law and Economics.

Volume (Year): 28 (2008)
Issue (Month): 4 (December)
Pages: 227-238

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Handle: RePEc:eee:irlaec:v:28:y:2008:i:4:p:227-238

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Web page: http://www.elsevier.com/locate/irle

Related research

Keywords: Insolvency codes Investment Insolvency costs;

References

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Cited by:
  1. Camacho-Miñano, María-del-Mar & Campa, Domenico, 2014. "Integrity of financial information as a determinant of the outcome of a bankruptcy procedure," International Review of Law and Economics, Elsevier, vol. 37(C), pages 76-85.

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