Abstract
We document that the strengthening of creditor rights after the staggered adoption of anti-recharacterization laws across U.S. states leads to reductions in the cost of equity capital. This effect is more pronounced among firms that are financially constrained, distressed, have more growth opportunities, and weaker corporate governance. We further find that the adoption of such laws directly lowers information asymmetry, firm risk, and leads to a more dispersed debt structure. Overall, the results suggest that strengthened creditor rights improve shareholder value through increased borrowing capacity and creditor monitoring.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
