Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/294826 
Year of Publication: 
2024
Series/Report no.: 
BOFIT Discussion Papers No. 6/2024
Publisher: 
Bank of Finland, Bank of Finland Institute for Emerging Economies (BOFIT), Helsinki
Abstract: 
The paper investigates the influence of the speed of liquidation of insolvent firms on leverage. The theoretical model presented formalizes the intuitive view that an increase in liquidation speed is expected to decrease average leverage as highly leveraged firms exit. Analysis of Indian data, however, suggests that an increase in liquidation speed increases average leverage. This finding is linked to influential observations at the right tail of the leverage distribution. We propose an asset-weighted variant of the proposition that holds with empirical data.
Subjects: 
Indian economy
insolvency and bankruptcy code
liquidation speed
leverage
JEL: 
C21
D22
G33
K35
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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