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Globally consistent creditor protection, reallocation, and productivity

Authors :
Bian, Bo
Publication Year :
2020

Abstract

This paper documents that resource reallocation across firms is an important mechanism through which creditor rights affect real outcomes. I exploit the staggered adoption of an international convention that provides globally consistent strong creditor protection for aircraft finance. After this reform, country-level productivity in the aviation sector increases by 12%, driven mostly by across-firm reallocation. Productive airlines borrow more, expand, and adopt new technology at the expense of unproductive ones. Such reallocation is facilitated by (i) easier and quicker asset redeployment; and (ii) the influx of foreign financiers offering innovative financial products to improve credit allocative efficiency. I further document an increase in competition and an improvement in the breadth and the quality of products available to consumers.

Details

Language :
English
Database :
OpenAIRE
Accession number :
edsair.dedup.wf.001..ad11e4d01fd8017b20720bcab4fe59a3