Access to internal capital, creditor rights and corporate borrowing: does group affiliation matter?

Research output: Contribution to journalArticle

Standard

Access to internal capital, creditor rights and corporate borrowing : does group affiliation matter? / Thapa, Chandra; Rao, Sandeep Keshava; Farag, Hisham; Koirala, Santosh.

In: Journal of Corporate Finance, Vol. 62, 101585, 06.2020, p. 1-25.

Research output: Contribution to journalArticle

Harvard

APA

Vancouver

Author

Bibtex

@article{4bb36fa8bf30425aa7b88d34750406d4,
title = "Access to internal capital, creditor rights and corporate borrowing: does group affiliation matter?",
abstract = "We examine whether the effect of increased creditor rights on corporate borrowing depends on firms{\textquoteright} access to internal capital. By exploiting a creditor protection reform in the emerging market of India, empirical outcomes strongly indicate that strengthening of creditor rights leads to increased corporate borrowing among firms that have constrained access to internal capital compared to business group affiliated firms, which have relatively easier access to internal capital. Further, the increased corporate borrowing by firms with constrained access to internal capital, in the post-reform period, is associated with a greater expansion of real investments, improved operational performance, and better market valuation. Taken together, these findings indicate that expanding creditor rights may aid in improving allocative efficiency.",
keywords = "creditor protection, internal capital, standalone firms, business group firms, corporate borrowing, firm performance",
author = "Chandra Thapa and Rao, {Sandeep Keshava} and Hisham Farag and Santosh Koirala",
year = "2020",
month = jan
day = "27",
doi = "10.1016/j.jcorpfin.2020.101585",
language = "English",
volume = "62",
pages = "1--25",
journal = "Journal of Corporate Finance",
issn = "0929-1199",
publisher = "Elsevier",

}

RIS

TY - JOUR

T1 - Access to internal capital, creditor rights and corporate borrowing

T2 - does group affiliation matter?

AU - Thapa, Chandra

AU - Rao, Sandeep Keshava

AU - Farag, Hisham

AU - Koirala, Santosh

PY - 2020/1/27

Y1 - 2020/1/27

N2 - We examine whether the effect of increased creditor rights on corporate borrowing depends on firms’ access to internal capital. By exploiting a creditor protection reform in the emerging market of India, empirical outcomes strongly indicate that strengthening of creditor rights leads to increased corporate borrowing among firms that have constrained access to internal capital compared to business group affiliated firms, which have relatively easier access to internal capital. Further, the increased corporate borrowing by firms with constrained access to internal capital, in the post-reform period, is associated with a greater expansion of real investments, improved operational performance, and better market valuation. Taken together, these findings indicate that expanding creditor rights may aid in improving allocative efficiency.

AB - We examine whether the effect of increased creditor rights on corporate borrowing depends on firms’ access to internal capital. By exploiting a creditor protection reform in the emerging market of India, empirical outcomes strongly indicate that strengthening of creditor rights leads to increased corporate borrowing among firms that have constrained access to internal capital compared to business group affiliated firms, which have relatively easier access to internal capital. Further, the increased corporate borrowing by firms with constrained access to internal capital, in the post-reform period, is associated with a greater expansion of real investments, improved operational performance, and better market valuation. Taken together, these findings indicate that expanding creditor rights may aid in improving allocative efficiency.

KW - creditor protection

KW - internal capital

KW - standalone firms

KW - business group firms

KW - corporate borrowing

KW - firm performance

UR - http://www.scopus.com/inward/record.url?scp=85081035974&partnerID=8YFLogxK

U2 - 10.1016/j.jcorpfin.2020.101585

DO - 10.1016/j.jcorpfin.2020.101585

M3 - Article

VL - 62

SP - 1

EP - 25

JO - Journal of Corporate Finance

JF - Journal of Corporate Finance

SN - 0929-1199

M1 - 101585

ER -