Abstract
This paper provides a comprehensive theoretical and empirical analysis of and throughout over 1.8 million private firms in Europe. We show that many of the outcomes associated with greater levels of creditor rights can be obtained with higher information sharing between banks. Both theory and empirics show that creditor rights and information sharing are associated with greater firm leverage, lower profitability, and greater distance to default. Moreover, theory and empirics find that creditor rights and information sharing are robust substitutes. Our analysis suggests that poor creditor rights can be substituted by improved information sharing.
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