Search results

This paper develops a debt-run model to study the effects of liquidity injections on debt markets in the presence of a renegotiation option. In the model, creditors decide when to withdraw their funding and equityholders can renegotiate the contract terms of debt. We show that when equityholders have a large bargaining power, liquidity injections into distressed firms can rather cause more aggressive runs from their creditors, hurting the debt value. This outcome occurs because equityholders can strategically utilize the renegotiation option as a bankruptcy threat, pushing down the debt value below the potential liquidation value of the firm. In such a scenario, a deterred default resulting from emergency capital injections could be detrimental to creditors.

This paper aims to analyze the ex ante and ex post economic efficiency of the preventive agreement (concordato preventivo) or composition with creditors as defined by the Italian Bankruptcy Law. This study examines four possible outcomes of the procedure: homologation (confirmation); the degree of dissent/consent of creditors; the revocation, admissibility or inadmissibility; the declaration of the company bankruptcy in preventive agreement.

This paper uses data from 728 Italian companies which filed for preventive agreement in 2016. In reference to each of the four possible outcomes, this study applies nine logit regressions to analyze the effects of a series of efficiency variables ex ante (corporate-based drivers) and ex post (procedure-based drivers).

Results show the relevance of the debt structure, ownership structure and virtuous behavior, corporate governance and management systems, as well as effectivity of the court control on the preventive agreement outcome.

This paper draws on original data of bankruptcy in Italy and gives empirical evidence of the ex ante and ex post factors on the outcomes of the preventive agreement.

The purpose of the paper is to analyze the new Bankruptcy Law in Saudi Arabia (KSA Bankruptcy Law) under both a comparative lens and a policy-oriented one, while highlighting some of the most essential operational steps and procedures in a bankruptcy proceeding under the law.

The approach adopted analyzes the specific mechanics and procedures of a bankruptcy law under the general policies and goals of bankruptcy. Additionally, where appropriate, a brief comparison to the US Bankruptcy code and its provisions is presented to provide an alternative approach on how similar issues are handled under a reputable and proven bankruptcy system.

Overall, the KSA Bankruptcy Law is a major accomplishment and advancement to the Kingdom’s insolvency regime. The law consolidated and codified the laws governing bankruptcy under the Kingdom’s prior regime, and followed the structure of a modern bankruptcy regime. In doing so, several of the law’s policies and objectives have been fulfilled by providing an effective, predictable and reliable bankruptcy system.

Given the relatively recent adoption of the KSA Bankruptcy Law, the paper provides a comprehensive assessment of the law’s operation and its effectiveness in achieving its policy goals as a modern bankruptcy law.

This paper aims to study the effect of the establishment of bankruptcy courts on bond issuance market. This paper helps to predict that the introduction of bankruptcy courts in China can mitigate price distortions caused by the implicit government guarantees and promote the development of the high-risk bond market.

This paper exploits the staggered introduction of bankruptcy courts across cities to implement a differences-in-differences strategy on bond issuance data. Using bonds issued in China between 2018 and 2020, the impact of bankruptcy courts on the bond issuance market can be analyzed.

This paper reveals that bond issuance credit spreads increase and is more sensitive to firm size, profitability and downside risk of issuance entity after the introduction of bankruptcy courts. It also reveals a substantive increase in bond issuance quantity and a decrease in issuer credit ratings following the establishment of bankruptcy courts. In addition, the increase of credit spreads is more prominent for publicly traded bonds, those whose issuers located in provinces with lower judicial confidence, bonds issued by SOEs and bonds with stronger government guarantees. Finally, the role of bankruptcy courts is more pronounced in regions with higher marketization.

This paper relates to previous studies that investigate the impact of laws and institutions on external financing. It helps provide new evidence to this literature on how improvements of efficiency and quality in bankruptcy enforcements relate to the marketization of bond issuance. The results provide further evidence on legal institutions and bond financing.

This study examines the impact of China’s mixed-ownership reform on the innovation of non-state-owned acquirers, with a particular focus on the impact on firms with high financing constraints, low-quality accounting information or less tangible assets.

We use a proprietary dataset of firms listed on the Shanghai and Shenzhen Stock Exchanges to investigate the impact of mixed ownership reform on non-state-owned enterprise (non-SOE) innovation. We employ regression analysis to examine the association between mixed ownership reform and firm innovation.

The study finds that non-state-owned firms can improve innovation by acquiring equity in state-owned enterprises (SOEs) under the reform. Eased financing constraints, lowered financing costs, better access to tax incentives or government subsidies, lowered agency costs, better accounting information quality and more credit loans are underlying the impact. Additionally, cross-ownership connections amongst non-SOE executives and government intervention strengthen the impact, whilst regional marketisation weakens it.

This study adds to the literature on the association between mixed ownership reform and firm innovation by focussing on the conditions under which this impact is stronger. It also sheds light on the policy implications for SOE reforms in emerging economies.

This paper aims to apply the debt sustainability framework using various ratios to review the current state of sovereign debt of Economic Community of West African States (ECOWAS) member countries.

Debt sustainability framework using various ratios (which include the present value approach, Country Policy and Institutional Assessment debt policy assessment ranking and solvency ratio of external debt) for the period 2010 and 2017 were used for the analysis to determine external debt sustainability and solvency of ECOWAS members.

The findings indicate that most ECOWAS countries are already turning at the unsustainable debt path and may renege in their debt obligations, thus creating a vicious cycle of external borrowing that could lead to capital flight.

This paper offers the empirical evidence to identify which of the ECOWAS countries are already at the threshold of external debt stress, and in the likelihood to renege on their debt obligations.

The Covid-19 pandemic has rekindled interest in sovereign debt crises amidst calls for debt relief for developing and emerging countries. But has debt relief lessened the debt burdens of emerging and developing economies? The purpose of this paper is to empirically address this question. In particular, the focus is on the implications of debt relief and institutional qualities for sovereign debt in emerging and developing economies.

The model extends the framework on the probability of default by incorporating the receipt of debt relief by a debtor country. Doing so allows to better explain movements of sovereign defaults relating to debt relief. The model is estimated via the regular probit regression.

The analysis shows that the debt relief provided, thus, far, failed to ease the debt overhang problems of developing and emerging countries and reduced investment. The current debt relief schemes may underscore the prospects of self-enforcing and self-fulfilling sovereign debt crises rather than eliminating the dilemma completely. Regarding the forms of debt relief, the analysis shows that debt forgiveness offers favourable prospects in terms of debt sustainability and economic outcomes than debt rescheduling. Perhaps, the sovereign debt crises, particularly in low-income countries, hinge on insolvency problems rather than transitory illiquidity issues.

Any debt relief mechanism should consider seriously the potential incentive effect that reinforces expectations of future debt-relief initiatives. Importantly, solving the sovereign debt problem requires a programme for sustained investment and economic growth, while not discounting the critical role of prudent debt management policies and institutions.

This study contributes a different angle to the debate on sovereign debt distress. Aside from the structural and economic factors, this study investigates the role of debt management policy in the debtor nation and the implications of debt relief benefits for sovereign risk. The framework also focuses on whether the different forms of debt relief exert distinctive impacts.

Some controversial cases of bail-in in the emerging countries have raised the question about whether for those countries to have in place a regulation for the bail-in is appropriate or not. To assess appropriateness, this paper investigates bail-in credibility among investors, as crucial condition for the credibility’s smooth implementation, by measuring the yield spread between bailinable and non-bailinable bonds.

The authors compare the yield spread of banks located in emerging countries that have in place a framework for the bail-in to the comparable yield spread measured for banks located in emerging countries without such framework. The comparison permits to detect whether there is a significant difference between the two spreads, which would suggest that bail-in regulation has been deemed credible by market participants where enforced, or not, which in this case would signal a problem of credibility.

The authors' results point out a significantly higher yield spread for banks located in emerging countries that have adopted a framework for the bail-in of creditors. Bail-in regulation has, therefore, being deemed credible in the adopting emerging countries, thus ensuring a crucial condition for bail-in regulation's smooth application. The authors also point out bank size and country's gross domestic product (GDP) growth as crucial moderators of bail-in expectations of market participants that can guide the implementation of bail-in rules in emerging countries.

This paper contributes to the literature on the credibility of bail-in with a new perspective from the emerging countries.