Academic Salon:Can Bankruptcy Laws Mitigate Business Cycles

date:2015-12-11 click:
Speaker: Pro. Qi Yaxuan(齐亚煊教授University of Hong Kong,Department of Economics and Finance,Associate Professor
Time 27th,December,Friday, 10:00-12:00am
Place:Yide Building,Room H212,Liulin Campus

Brief Introduction of the Speaker:
Yaxuan Qi is an Associate Professor at the Department of Economics and Finance in City U of Hong Kong. She received her PhD at the Rutgers University in New Jersey, United States. She obtained a BA in Economics at the Central University of Finance & Economics in Beijing, and a MA in Finance at the Renmin University of China. Prior to joining the Department of Economics and Finance at the City University of Hong Kong, she was an Associate Professor at the Department of Finance, Concordia University, Canada. She is interested in Law and Economics, Corporate Finance and Household Finance. She has published papers in Journal of Financial Economics, Journal of International Business Studies, Accounting Review and Journal of Law and Economics.

We examine how legal creditor rights are related to debt financing and corporate investment over the business cycle. Using firm-level data from 40 countries, we find that creditor rights are associated with greater debt financing and investment during economic downturns but significantly less during expansions. We also find that  the  negative  relation  between  creditor  rights  and  the  cost  of  debt  is concentrated  during  recessions.  The  beneficial  effects  of  creditor  rights  are stronger  for  firms  that  are  more  likely  to  have  severe  shareholder-bondholder agency problems. Overall, the results suggest that better creditor protection laws help moderate the decline in investment and debt financing during recessions and potentially help smooth business cycles.