Do Debt Contract Enforcement Costs Affect Financing and Asset Structure?
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چکیده
Using staggered changes to debt contract enforcement costs in India, we estimate it’s causal effect on financing and asset maturity. A reduction in enforcement costs is associated with an increase in long-term debt and a decrease in short-term debt and trade-credit. The increase in debt maturity is confined to firms that borrow from multiple and diverse set of lenders and to smaller firms. Firms reduce the number of banking relationships and increase (decrease) the amount of long-term (short-term) assets on their balance sheet. Our results highlight an important “causal” effect of debt contract enforcement costs on firm financing and investment. JEL Classification: F34, G32, G33, G38, K42
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