Abstract
The SARFAESI Act of 2002 strengthened creditor enforcement rights in India by granting banks broad new powers to enforce claims against delinquent secured borrowers. Using a difference-in-differences design, I find that firms with high levels of secured borrowing (i.e., treated firms) exhibit an improvement in accounting quality post-reform. The main findings are especially stronger among smaller firms and firms not affiliated with business groups. I also document significant cross-sectional variation in the main results based on borrowers' financial constraints and banking relationships. These findings are consistent with banks increasing monitoring of borrowers under a stronger creditor rights regime. Overall, this study provides new evidence that stronger creditor rights translate to higher accounting quality.
Published Version
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