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Severe or gentle bankruptcy law: Which impact on investing and financing decisions?

  • Blazy, Régis
  • Deffains, Bruno
  • Umbhauer, Gisèle
  • Weill, Laurent

This research investigates how legal sanctions prevailing under bankruptcy may impact on debt contracting and on investing decision. We model firms having the opportunity to engage (or not) faulty management. In case of default, the firms may escape costly bankruptcy by reaching a private agreement with the bank. We show that such renegotiation process may depend on the level of severity of bankruptcy law.

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Article provided by Elsevier in its journal Economic Modelling.

Volume (Year): 34 (2013)
Issue (Month): C ()
Pages: 129-144

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Handle: RePEc:eee:ecmode:v:34:y:2013:i:c:p:129-144
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/30411

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