Creditor rights and corporate risk-taking
By: Viral V. Acharya, Yakov Amihud, Lubomir Litov.
Contributors: Amihud, Yakov, 1947-; Litov, Lubomir P.; National Bureau of Economic Research.
Series: NBER working paper series -- working paper 15569; Working paper series (National Bureau of Economic Research : Online) -- working paper no. 15569.
Publisher: National Bureau of Economic Research
Published: 2009
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Description: "We analyze the link between creditor rights and firms' investment policies, proposing that stronger creditor rights in bankruptcy reduce corporate risk-taking.  In cross-country analysis, we find that stronger creditor rights induce greater propensity of firms to engage in diversifying acquisitions, which result in poorer operating and stock-market abnormal performance.  In countries with strong creditor rights, firms also have lower cash flow risk and lower leverage, and there is greater propensity of firms with low-recovery assets to acquire targets with high-recovery assets.  These relationships are strongest in countries where management is dismissed in reorganization, and are observed in time-series analysis around changes in creditor rights.  Our results question the value of strong creditor rights as they have an adverse effect on firms by inhibiting management from undertaking risky investments"--National Bureau of Economic Research web site.
Notes: Title from PDF file as viewed on 12/22/2009.

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